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Cash still rules in India despite the government’s push to increase awareness about digital payments along with the sustained effort by banks to enrol merchants to join the digital payments platform.
A report titled India Digital Report by electronic payment processor Worldline India, analysed the transactions processed by Worldline in July-September 2019, and public databases to derive some unique insights.
Some of the key hindrances to the growth of digital payments are the higher cost of acceptance infrastructure, lack of financial literacy amongst smaller merchants, high propensity of households to save in cash and the unorganised cash intensive SMEs, said the report.
However, the future looks bright as the regulator has decided to operationalise the Acceptance Development Fund from January 1, 2020.
Currently, Worldline has over 1 million merchant touchpoints pan-India, accounting for 30 per cent of the merchant acquiring touchpoints. “It goes without saying that payments for goods and services, at physical merchant locations, through a digital medium will continue to grow leaps and bounds in the coming months,” said Sunil Rongala, Vice President- Strategy, Innovation & Analytics, Worldline India.
He added, “However, evidence suggests that a sizeable percentage (over 90 per cent) of transactions are still made through cash and in tier-3 and below cities, a case can be made that all transactions are made through cash.”
This may improve over the years but it will likely be a slow crawl, he added. In India, there are 889 million credit and debit cards but only 4.59 million point of sale (POS) terminals.
ATM withdrawals
While the number of card transactions done at merchant locations is on the rise, ATM withdrawals data suggests that cards are being used for withdrawing cash in a big way and this is likely because there are little to no avenues for them to use their cards or other digital instruments, according to the report.
The number of POS terminals increased to 4.59 million in September 2019 from 3.39 million in September 2018, an increase of 35.3 per cent.
Transactions at POS terminals increased from 1.5 billion transactions in Q3 2018 (July-September) to 1.8 billion transactions in Q3 2019. The value of transactions at POS terminals increased from ₹2.8 trillion in Q3 2018 to ₹3.5 trillion in Q3 2019 (up by 23.2 per cent), the report showed.
In Q3 2019 (July-September), the average ticket size on POS terminals for credit card transactions was ₹3,324 and ₹1,357 for debit card transactions.
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