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21
December 2016
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Digital Cashless India
(The Total Investment & Insurance Solutions)
With the recent demonetisation, the
Government, Reserve Bank of India (RBI), banks and non-banking finance
companies (NBFCs) are trying hard to push customers to use different digital channels
like m-wallet, mobile banking and usage of point-of-sales (PoS) machines to
have a less cash economy. However, there is a long way to go and all players
need to create a better ecosystem, enhance infrastructure and focus on security
systems, says a report. The Total
Investment & Insurance Solutions
In the research note, State Bank of India
(SBI) says, "Despite Government’s move to reduce the cash transactions in
the economy, people are standing in queues to withdraw money from banks and
automatic teller machines (ATMs). It is not easy to shift all the people to use
digital mode in their day-to-day transactions, which may be due to a number
reasons like level of education, acceptability of technology, and lack of
infrastructure. We believe, Government may promote digital payments in the way
of incentives to customers like immediate discounts, rebate on levy of service
tax if paid through digital or cards, and merchants can be given concession in
service tax or Goods and Services Tax (GST) for accepting transactions from
digital or cards means." The Total
Investment & Insurance Solutions
In line with the digital India mission, the
RBI also instructed banks and NBFCs to waive or rationalise transaction charges
while using cards at PoS, customer charges for Immediate Payment Service
(IMPS), Unified Payment Interface (UPI), and Unstructured Supplementary Service
Data (USSD). Further, the central bank also capped the merchant discount rates
(MDR) structure for debit card transactions. In addition to that, the Ministry
of Finance has also announced a number of small incentives to push for digitalisation
in the country. The Total Investment
& Insurance Solutions
To find out the actual demand for cash in the
country, SBI says it has looked at RBI ATM transactions data for the past six
years. The data shows that there is an average withdrawal of around Rs3,000 per
transaction from ATMs in a month. According to the data on the number of
transactions at ATMs, around Rs8,000 crore are required per day for smooth
functioning of ATMs.
"This translates into Rs3.7 lakh cash
requirement per ATM per day to meet the customers’ requirements. This may be
the amount of cash required for the daily transactions, a part of which needs
to shift to digital. However, the immediate transaction value that needs to be
shifted from ATM to other digital channels is a whopping around Rs46,000 crore
per month, till the limit (on withdrawals) of Rs2,500 at ATMs remains imposed.
We thus expect that Government will not withdraw this limit till January 2017,"
SBI said in the report. The Total
Investment & Insurance Solutions
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Digital Cashless India1(The Total Investment & Insurance Solutions)
According to the research note, the
demonetisation process has opened huge potential for digital channels. However,
the data released by RBI on electronic payment systems as on 14 December 2016,
reveals some interesting facts. The
Total Investment & Insurance Solutions
For example, post demonetisation, the per
value transaction on debit and credit cards actually declined due to less
number of PoS machines in the country. The debit and credit card transactions
at PoS were Rs35,240 crore in November 2016 and Rs18,130 crore in December
(till 13th of the month) in value terms, compared with Rs51,120 crore in
October this year.
At present, there are 15.1 lakh PoS across
India and when the usage of debit cards is analysed the numbers reveals how
much further the country needs to go. As of October 2016, per debit card
transaction at PoS was only Rs1,500, and the number of transactions was just
1.3. "Thus on an annualised basis, the debit card transaction is around
Rs24,000. The Government should thus incentivize the usage of debit card (there
are 74 crore debit cards in the country) on PoS by giving tax concession like
80C," SBI says. The Total
Investment & Insurance Solutions
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Digital Cashless India2(The Total Investment & Insurance Solutions)
As per SBI's analysis, this is the same story
for transactions through pre-paid instruments (PPIs) including m-wallet. It
says, "The per transaction value declined post demonetisation. This
decline is possible due to the fact that still customers are not comfortable in
using m-wallets either due to lack of security or trust or awareness." The Total Investment & Insurance
Solutions
"However," the report says,
"the mobile banking transaction data indicates a huge success, with total
volume through mobile banking increased by 9.7% month-on-month (m-o-m) to
Rs1.25 lakh crore in November 2016. The per transaction value increased by a
whopping Rs17,207 in November from Rs14,536 in October 2016." The Total Investment & Insurance
Solutions
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Digital Cashless India3
(The Total Investment & Insurance Solutions)
The current size of digital banking,
including credit card and debit card transactions through PoS terminals, transaction
through PPIs like m-Wallet, PPI cards and mobile banking, is around Rs1.7 lakh
crore. This size has to increase from the current level to at least Rs3.5 lakh
crore, which according to SBI is a conservative estimate of the gap between the
actual currency in circulation and required currency in circulation. And to
achieve this, India would require around 20 lakh additional PoS terminals.
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Digital Cashless India4
(The Total Investment & Insurance Solutions)
"Further," SBI says, "We have
to ensure that per mobile banking transaction increases currently (October
2016) to Rs25,000 from Rs14,500 monthly. To fully utilise the potential
residing in the digital channel, banks also need to focus on prepaid payment
instruments particularly on mobile wallets. Mobile wallets transactions need to
increase from current level of Rs3,400 crore to around Rs10,000 crore going
forward. This means that value per transaction increasing significantly to
around Rs1,000 from current level of mere Rs475". The Total Investment & Insurance
Solutions
"The pace of expansion of digital world
is increasing and hence, technology adoption should be conscious, purposeful
and value adding. For improving the IT security, there is a need to educate
customer awareness level," SBI concluded.The Total Investment & Insurance Solutions
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