Cashless India

While the anguish and anxiety caused by demonetisation will remain for some time, the spurt in the use of plastic money and e-wallets is a welcome positive outcome, and signals that India can reduce the use of cash for many transactions. Also of significance is the wave of disruptive innovations unleashed by the move. Payment platforms such as Paytm have already built an in-app point of sale (POS) machine so that those who do not have the Paytm app on their phones or do not have smartphones can share their debit cards details to make payment. It is a different matter that the use of the application is on hold for now — the genie is out of the bottle, and such innovations will soon become a reality. Equally significant is the rise in competition between various payment gateways and platforms to become the preferred mode for completing transactions. Paytm, for instance, with its aggressive marketing, has come from nowhere to become synonymous with e-wallets, much like Xerox for photocopying. In doing so, it has challenged established players such as Visa and MasterCard, especially with vendors who do not have a POS machine to accept payments.

An increase in cashless transactions was expected as the natural outcome of the demonetisation move — and a not-so-hidden motive of the Centre, which has been pushing Digital India plans. While the Centre and the Reserve Bank of India have announced various measures such as waiver of charges for use of cards over the past 18 days to encourage greater use of plastic money and e-wallets, serious efforts are needed to boost the use of RuPay, the Indian payment gateway, and the Unified Payments Interface, an indigenous low-cost platform to payments and money transfers. This is both an economic and a strategic imperative. Ensuring multiple strong players for both payment gateways and e-wallets is also important to ensure that no one player becomes dominant and has the room to take decisions that may adversely impact users.

Becoming a cashless society painlessly is an ideal situation. Fewer cash transactions in an economy can help bring down transactions costs, instances of economic offences and street crime. It needs some disincentives for withdrawing cash beyond a certain limit as well as incentives to encourage those who switched to digital payments systems to stay with that mode. Above all, governments — both State and Central — need to ensure that digital trails exposed by this transition are assiduously tracked to maximise revenue gains.

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