Of late, WhatsApp has become very active on the issue of Demonetisation – its effects – good or bad, some jokes, some statistics, some facts, some relevant information, etc. However, I cannot resist myself without reproducing the following message on the benefits which our country can derive provided it becomes Cashless:
- Creation of Black Money – 0%
- Cost of Printing Notes – 0%
- Cost of Maintenance of Cash by RBI / Banks – 0%
- Wastage of Paper for Printing Notes – 0%
- Fake Currency Notes – 0%
- Chance of Pick Pocketing / Kidnaping – 0%
- Scam / Corruption – 0%
- Evasion of Tax – 0%
- Wastage of time in Visiting Bank Branches – 0%
- Reduction in Militancy & Terrorist Activities – To a substantial extent
Cashless society is an ideal situation which may not be possible for any country to attain excepting a very small country. So for a country like ours, it is no doubt an almost impossible task. But if we follow the call given by our Prime Minister, Shri Narendra Modi, we will certainly achieve the goal of ‘Less Cash Society’ which is the motto of Reserve Bank of India (RBI).
As per Bank parlance, there are two predominant channels through which transactions are happening viz. Branch and Alternate Channel. But in Alternate Channels, ATMs contribute the major part of the transactions which are cash transactions. As such, in our country around 96% of the transactions are happening through cash. This happens to be the root cause of corruption, fraudulent activities, antisocial / antinational activities, tax evasion, etc.
So, how can we change the track / the trend? By only telling people to go for Electronic / Digital Banking is certainly not going to be fruitful / effective. That is my experience so far. I am a strong supporter of cashless transactions and I do practise the same. I also motivate people around me to use electronic modes to do transactions and I am getting results albeit at a slow pace.
What I have experienced during my stint in State Bank of India initially as DGM(IT – Coordination) and then as GM(Payment Solutions) is that on boarding of people to Digital Banking Platform is directly proportional to educational background and awareness of the people and inversely proportional to their age profile. Again, its growth depends mostly on the overall development of the place and that’s the reason why Metro & Urban Centres are giving much better results vis a vis Semi – Urban and Rural areas so far as the propagation of noncash transactions are concerned.
It is no denying the fact that Government of India, State Governments, RBI, National Payment Corporation of India (NPCI), Banks, Service Providers in Payment space, etc. have been trying relentlessly towards achieving the target of making India a Cashless Economy. But the result so far, even though encouraging, is nowhere near the expected level. Why it is so? Whether the right Eco-system is in place? Where do we need to concentrate more? What are the hindering factors? How can we remove those obstacles and facilitate digitalisation of transactions?
Let us now discuss these points at length and find out the ways and means to expedite the process to its logical end.
In an electronic payment space, the following entities are involved:
- Technology Service Providers / Aggregators
- Merchants / Utility Service Providers / Billers / Institutions
- People / Customers / Users
Again, the enablers for electronic payment are, as under:
- Internet Banking by Banks
- Mobile Banking by Banks
- Point of Sale (POS) / Mobile POS Device by Banks – through Debit / Credit / Pre-paid Cards
- Mobile Wallet by Banks / Telcos / Private Players
For any technology product / process to grow / propagate, the under mentioned three major factors need to be addressed at right earnest and also, on an ongoing basis:
- Awareness of the users as regards the pros and cons of the product / process: Awareness or knowledge of any product / process is the fundamental requisite for its proliferation. So, users / beneficiaries / people at large need to be made aware of the benefits / advantages of the product / process. Here, I would like to share my experience as regards very poor usage of Funds Transfer Facility through Green Channel Counter (GCC) by the customers. It was due to sheer lack of knowledge / awareness but when the customers came to know about the facility, within no time, the usage picked up manifold.
- Availability of the facility free from all the glitches – product / process in the vicinity of the users: This is the second step to ensure adaptation of any product / process by the users. It means if the facility is not made available near the users, they will not be interested to use it even if they are fully aware of the product / process and its benefits. Taking the same experience of GCC, we found that even after making the customers aware of the advantages of GCC, the transaction count did not improve. However, with the coverage of a large number of branches, utilisation of GCC went up leaps and bounds.
- Robust Security features of such product / process to satisfy the security concerns of the users: It is a proven fact that unless and until people are satisfied with the security features of any technological innovation, they will never try it. The concern is also genuine as it is their hard earned money which may vanish within no time if security system is not made fool proof. It is also of paramount necessity that security aspects are taken care of on a regular basis.
Once the aforesaid three areas are fully addressed, people will go whole hog to adopt the facility / service.
In the entire chain of cashless transactions, Merchants / Service Providers / Billers / Institutions play a major role by providing the required amount of succour to make the system up and running. Excepting in a few cases (where the customers / people pay the charges for availing the facility), they provide the interchange (Merchant Discount Rate or MDR) which is paid from the amount of profits / charges / fees they earn. That’s precisely the reason they want to continue with cash transaction instead of digital transaction. Here I would like to give an example to clarify the underlying sentiment of Merchants, etc. Suppose the MDR is 1% and the Selling Price of goods is Rs.2000/-. So they will have to pay Rs.20/- as interchange against Nil charge for cash transaction (Handling cash has its own implicit pros and cons but we need not discuss this here.). It is, therefore, of utmost importance to reduce the MDR to bare minimum so that MDR does not act as an impediment on the way to mass digitalisation. Another important factor which is a major barrier for the merchants to go for cashless is the tax implication in case of digital transactions. In case of digital transactions, everything becomes black and white and as such, merchants do not favour them. On the contrary, if the transactions are made in cash, they can very well evade payment of tax. So for effective on boarding of merchants, the best way is to give some tax concession to them. Incidentally, South Korea adopted such practice to promote online transactions.
While Technology Service Providers / Aggregators have been providing, upgrading and maintaining the technology platform to promote cashless transactions, the expenditures both capital and day-to-day are being met by Banks / Aggregators. As the cost of setting up as well as maintenance of technology platform is huge, Banks / Aggregators need to be compensated by way of fees / charges which are being paid by merchants / billers / users. Needless to add that in all such transactions, Banks work as a Nodal agency and float funds are always maintained by them.
In the aforesaid backdrop, if we are really serious in our efforts to make the society cashless, we have to adopt ‘Carrot & Stick’ Policy. To that end, my suggestions are as under:
- To develop the ecosystem congenial to digital transactions, we need to ramp up installation of POS / M-POS, Opening of Merchant accounts, Linkage of such accounts with mobile and Aadhaar numbers. The coverage has to be near 100% in metro and urban centres. In case of semi – urban and rural areas, the task has to be started with full vigour as there is hardly any penetration so far. To cite an example, in Bolpur, a Sub-divisional H.Q. where we stay now, the penetration is hardly 1% of large and mid – sized merchants.
- To ensure quick penetration, the threshold limit for cash transaction should not be more than Rs. 5000/- per transaction in metro / urban centres and Rs. 10000/- in other areas.
- MDR and other charges have to be brought down drastically with a view to reducing the burden on the merchants which will act as a catalyst for quick adoptability.
- Some concession in tax may be thought of to increase the acceptability of digitalization by the merchants.
They have to be made aware of the pros & cons of cash transactions vis a vis those of online transactions.
For Customers / Users:
- Apart from the three factors viz. Awareness, Availability and Security (Explained at length on page number – 2), people need to be told about the pros & cons of cash transactions vis a vis those of online transactions.
- Banks need to be compensated by the GOI for taking the extra load of opening account, creating awareness among people / merchants and ramping up of digitalisation.
For Technology Service Providers / Aggregators:
- Demand has to be placed on Technology Service Providers / Aggregators for continuous growth of technology platform with the growing needs of the country coupled with the requisite cyber security.
I am confident that with the support and positive will power of all concerned, we will certainly reach a level which can be termed as ‘Less Cash’ Society which is our Motto. Let’s generate the required momentum to make our dream of “Digital India” a reality.
I joined SBI as a Probationary Officer in 1981. Since then, I have worked in various capacities as Branch Manager, Regional Manager and Deputy General Manager at different places. My specialised areas are Credit and General Banking.
I also was Chairperson of Reserve Bank of India Working Group on Evaluation of Feasibility of Aadhaar based Biometric Authentication as Additional factor of Authentication for card present transactions and related issues.
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