Approximately 11 per cent, of urban Indian households have embraced cashless transaction that can set the tone for more people to use less cash. However, penetration of cashless transaction stands at measly 0.43 per cent.
It has been seen that only about 3.6 per cent of the households in India make cashless transactions transations. Two main reasons for 94 per cent not using cashless transaction are:
• Seller not accepting cards
• Lack of awareness amongst consumers
With over Rs 1 trillion of cash circulating, a transformation of one per cent moving to cashless transactions can reduce cash circulation by Rs 1 billion.
According to a report ‘Road To Less Cash’ by India Development Fund (IDF) and Internet and Mobile Association Of India (IAMAI), and sponsored by Visa and ItzCash, a moderate growth of cashless transactions by five per cent a year will save the country more than Rs 500 crore annually. The report goes on to add that inducing MNREGS beneficiaries to undertake cashless transactions would immediately mean that around 52 million households from rural India will be part of the cashless network. A modest amount (10 per cent) spent on cashless expenditure from the MNREGS payment would immediately mean that close to Rs 3000 crore will be the additional cashless transaction, leading to an annual savings of Rs 25 crore on printing and managing currency.
Almost 96 per cent of all transactions in the country are conducted in cash and the repercussions are felt by individuals, businesses, the Government and the nation as a whole. In 2009-10, RBI incurred an annual cost of Rs 2,800 crore to just print the currency notes, which was 0.4 percent of the total currency in circulation. This cost, however, does not include the cost of storage, transportation, security, detection of counterfeits, etc. The cost of printing and maintaining this extensive amount of cash costs the country about 0.2 of its GDP.
Uttam Naik, Group Country Manager for India and South Asia, Visa said, “It is imperative that we highlight the savings which the Indian economy can achieve by replacing costly paper cheques, vouchers and cash transactions with safer, streamlined and more transparent electronic payments. In the current challenging economic situation, increasing the adoption of electronic payment gives the unbanked and under-banked more financial services and options to create efficiencies, contribute to GDP growth and job creation as proven in many developing markets like Brazil, Mexico and Russia.”
With regards to customer acquisition, the findings indicate that the process for acquiring any of e-payment instruments is cumbersome. Know Your Customer (KYC) norms act as a deterrent towards introducing many more Indians into the formal financial fold as cash is immediate, better and convenient option for the masses. The report recommends that the KYC norms be further simplified, especially for prepaid payment instruments for the purpose of day-to-day purchase of goods and services, while maintaining required level of control for other sensitive services like money transfer, cash out.
While the e-payments industry continues to ensure that more and more Indians have access to e-payment instruments, there is no incentive for them to use their card in lieu of cash. In many other cases, there is no ‘point of payment’ infrastructure where these millions of instruments can be used.
Naveen Surya, Managing Director, ItzCash Card said, “RBI’s thrust to promote electronic payments in India, opens up various avenues for alternate payment solutions. Creation of an e-payment eco system depends on the success of multiple factors such as merchants, POS infrastructure, e-wallet, mobile applications, net banking, etc. The success of all this is deep-rooted and needs concentrated efforts towards merchant education, provision of financial incentives to them, POS infrastructure set-up, etc. Leveraging trends like mobile payments due to its high penetration and the wide spread acceptance of net banking, e-wallet and mobile applications amongst youth would facilitate the use of e-payments further.”
The report recommends that a massive campaign at the country level be carried out by all stakeholders, including the government, regulators and the industry.
According to Dr Subho Ray, President, IAMAI, “Given the state of the economy, it is imperative that we shift to a more cash free economy, which will usher in more transparency and will also prevent leakages in the government delivery of social schemes.” man