The digital revolution is still a long way away

E-commerce sites are doing brisk business. True, it may be ages since you signed a cheque. But if you think India has embraced digital transactions, you are far off the mark.

Take banking transactions. For Aam India, cash is still king. According to RBI data, cash still accounts for 90 per cent of all monetary transactions in India. Even as growing numbers in cities are using electronic payment systems, such as the National Electronic Funds Transfer (NEFT), these made up a paltry 3.2 per cent of total payments across the country in 2012-13. In fact, even old fashioned cheques account for less than 10 per cent of total payments.

The number of digital banking customers in India is estimated to be about 100 million. That’s a third of the number of bank accounts. But remember, nearly half the Indian population does not have a bank account yet.

If you’re doing all your shopping online, you should know that most of Bharat still trudges to the nearest retail store.

Estimates peg the value of online retail business at $1-1.8 billion (Rs 6,200-11,000 crore) in 2013. This is just a fraction of the $500-billion retail market in the country, expected to grow to $1 trillion by 2020.

Not many choose to buy insurance policies online either. Internet purchases of insurance make up just 2 per cent of the sales that agents make by visiting homes.

Approximately 13 million searches take place every month on insurance, but sales mainly take place through traditional channels as consumers are not comfortable with online transactions, say industry watchers.

“Net-savvy customers prefer to deal directly through the Net. But it is early days. We are trying to arm the agent with technology tools to enable better selling,” says Puneet Nanda, Executive Director, ICICI Prudential Life.

Where it clicked

In fact, the markets where online transactions have clicked are those frequented by the savvy urban customer. For instance, online bookings account for 60-65 per cent of all air tickets sold in the country, according to Ticketgoose.com Co-Founder and President Karthi Easwaramoorthy.

IRCTC is quite popular and e-ticketing for railway journeys has also gained traction, rising from 15 per cent of bookings in 2008 to 45 per cent in 2011-12.

But just 5 per cent of private bus tickets were sold online in 2013, says Easwaramoorthy. He thinks this points to a huge market potential, with more travellers likely to connect online with their mobile phones.

The Internet has also redefined the share trading game in India, with online share trading accounting for 47 per cent of total cash trades on the NSE.

Apart from institutions that trade online, more investors embraced the ease of trading from the comfort of their homes.

Big policy push

The slow adoption of the digital mode across Bharat is probably partly due to the lack of strong Internet connectivity.

TRAI data shows that India had only 165 million Internet users (compared to a 1.2-billion population) last year. Of this, broadband connections made up a measly 15 million.

But 143 million accessed the Internet on their mobile phones. And it is on these connections that policymakers are pinning their hopes, as they move to push electronic payments.

About 38 million of the 890-million mobile users have registered to transfer money using their phones so far.

Online shoppers are growing at 30 per cent every year.

And a recent McKinsey report predicted that the number of digital banking customers in India will rise from 100 million in 2012 to 450 million by 2020.

“Around 44 per cent of all our bank transactions originate through the Net and mobile. There is an increasing trend of people moving towards digital banking channels or non-branch banking channels,” says Nitin Chugh, Head of Digital, HDFC Bank.

(This article was published on January 4, 2014)
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