Pushing digital money

Measures announced by the Centre over the course of this week to encourage digital payments are welcome, even though they have come after the cash crunch escalated. Almost all these measures could have been announced and implemented ahead of the demonetisation of ₹500 and ₹1,000 bank notes and introduced as a well-considered, integrated package to promote digital money. It could easily have been sold as part of the Digital India campaign launched in July 2015. Had the transition started months ago, the demonetisation process would have been somewhat less painful, at least in urban areas. Measures announced over the past week to encourage digital payments with credit or debit cards, e-wallets and internet/mobile banking include waiver of service tax charges for payments up to ₹2,000 made with cards, discounts of 0.75 per cent on purchases of petrol and diesel, deployment of two point of sale terminals (POS) in villages with population of less than 10,000, 0.5 per cent discount on monthly and season suburban railway tickets, five per cent discount for the Railways’ on-board and in-station services, and discounts on insurance premium paid digitally. A few measures were also announced for merchants, such as nominal rental for POS machines.

But this is only one step towards a cashless economy. Both front-end and back-end changes are required to spread awareness and enhance usability of various digital payment modes. Special efforts are required to teach both the less tech-savy as well as the unlettered on how they could use such modes of transaction. Infrastructure creation — from networks and connectivity to ensuring last-mile availability of ATMs and POS machines, specially in the rural areas — needs to be massively stepped up. This is necessary if the move to issue RuPay cards to the poor is to succeed. Ensuring greater acceptability of digital money — just about 14 per cent of debit card transactions across the country were at a POS — is also imperative. It is important to dispel doubts and fears that people have about digital money and the security of their transactions.

The Centre must wake up to the need to make digital payments more secure. A major breach in debit card data security was discovered late October. Mobile wallets and mobile banking can be vulnerable to security breaches given that most smartphone users have multiple apps installed, and almost all those apps have access to sensitive user information on the phone. To make digital transactions truly secure, the Centre needs to look at restricting the information that mobile apps seek and put a regulatory framework in place.

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