Money is the fundamental need of an economy. In a nation like India, it is indisputable that it is an immensely cash-concentrated economy. This is inferable from several key factors like the non-existence of intermediaries, convenience, transaction at a go, and tangibility of cash, to name a few. Another significant factor reinforcing money transactions is the constant propensity of purchasers towards using hard money. India occupies the fourth position globally in terms of cash-intensive users. Pretty much every nation is adopting cashless transactions and even have gained huge ground. It is only a world trend in which India needs to progress.
The Digital Payments Landscape in India
India’s road to digitization has been somewhat deferred until 2016. Regardless of the availability of several other alternatives besides cash, the inclination was still on the latter one because of the grip it has over other options. Despite the payment choices available, for example, plastic cards and mobile payments, their usage was not adequate for an economy headed straight towards development. Thus, demonetization was a major initiative undertaken by the Government of India with a few targets (prevent the creation of black money, fake currency, stop tax evasion), along with the development of Digital India. This scheme upset the cash flow in the nation as practically 86% of the currency ceased to be legal tender, prompting a rapid increase in the adoption of cashless transaction in India.
The initiation of demonetization with a wide array of motives to limit setbacks in the Indian economy has additionally pushed the need for a cashless economy and digital modes of payments. This has brought another influx of progress and a change in pattern in the use of online platforms as a way of carrying out transactions. Despite the fact that the digital payment movement was making rounds for a few years, however, it didn't get a significant push among the majority because of the shift in technological practices.
The majority of people in India live in rural areas where the use of digital platforms didn’t get enough support because of several shortcomings. In addition to this, the stubborn attitude of the individuals for not adopting digital platforms never helped in bringing out digital modes as one of the fundamental means for payments. The changing business landscape and the advancements in smartphone technology have opened up a Pandora's Box. This filled in as other drivers to the growth of digital banking, green banking, mobile wallets, mobile banking, e-commerce, etc.
Since the demonetization initiative, the Government of India has been working hard to promote digital transactions to buyers, proactively offering various rewards and loyalty programs. Until now, it appears to be working: digital transactions have seen a 400-1000% surge since the government announced the discontinuation of old notes.
These changes have given rise to the ideal economic conditions for other digital payment modes, along with the existing debit/cards and mobile wallets. These are not simply the basic banking applications or sites either. The National Payments Corporation of India, together with the RBI, has introduced UPI or United Payment Interface, which manages various accounts from partaking banks, and offers a wide range of financial services all in a single mobile app.
A positive step unquestionably, however, not one without its issues. Despite the fact that India has around 800 million smartphone users as of December 2019, there is still a long way to go until everyone in the country has access to internet connectivity.
Yet, the banks have ensured that owning a smartphone isn't mandatory for accessing mobile payments, providing a USSD alternative on older, cell phones (non-smartphones) which users call up for. Likewise, the "Digital India Initiative" has been set up to give web access and mobile phone coverage crosswise over India, helping over a billion people to participate in online activities and use digital payment platforms.
Moreover, the National Payments Corporation of India (NPCI) has been promoting the use of Aadhaar Enabled Payment System (AePS), which is a biometric authentication system used for carrying out financial transactions on a Micro-ATM. AePS can be used to open a bank account for a new user, withdraw/deposit cash, and carry out transactions by inserting just their Aadhaar number and verifying it with their fingerprint or iris scan. It was created as a means to serve the rural population where people do not have access to cash machines. It can possibly be the foundation of the government's vision of a cashless economy – if it can tap deeply into rural India.
The population of India is the greatest obstacle in the usage of the cashless transaction modes. Overall, they have applauded the beginnings of a cashless society, yet with some disapproval of the initiation of demonetization. People can obviously see the many benefits of going cashless – like monitoring expenditures and giving exact change at small vendors – and are ready to embrace.
The potential is there, and the Government is surely keen to grasp it. For the cashless strategy to work, the several initiatives by Indian authorities such as internet penetration, working on finance, as well as the public relations strategies are all essential in making it possible. Regulated by Niti Ayog, the objective is to execute these strategies as soon as possible.
In any case, the people in India need to feel certain about the move, particularly the individuals who question online security. Moreover, the cashless strategy needs thorough pan-India awareness, particularly in rural India. Involvement by banks and other financial institutions to create awareness and training programs will eventually lay the foundation for a cashless economy.
In spite of the fact that it would be impossible for India to turn into a cashless economy in the short measure of time since the demonetization, it is certainly something the nation can anticipate. Making India cashless transaction treating various interminable societal diseases using only one fix. The initial step is demonetization and now much more needs be done – but the nation can reach there.