SHREYA KEDIA
India is on the cusp of a digital revolution, but it is to be seen if it emerges victorious; if it sustains the momentum post-demonetisation, or does it push this dream of a ‘less cash and then cashless’ economy for a later stage. While the task is enormous, given the many challenges, the Union Government has already set the ball rolling by initiating a number of measures to reduce people’s dependence on cash.
Primary amongst those initiatives had been the Government’s thrust to open zero-balance Jan Dhan bank accounts, in both organised and unorganised sectors, for unbanked accounts. Ever since demonetisation, over a million accounts have been opened last month. According to Government sources, the number of Jan Dhan bank accounts in August stood at over 230 million, while in November it surged to 256 million.
Second, the Government has reached out to various States, by setting a five-member Chief Ministers’ panel, headed by Andhra Pradesh Chief Minister Chandrababu Naidu, with former UIDAI chief Nandan Nilekani as a special invitee in the 13-member committee, to review the impact of demonetisation. The panel is supposed to examine and make suggestions to tackle the problems faced at the ground level by the public, in the implementation of digital payments across the country. It will outline measures for a rapid expansion of digital payments like debit cards, credit cards, digital wallets, e-wallets, Internet banking unified payments interface et al.
Definitely, the shortage of cash has forced people, especially in urban areas, to opt for digital payments. But the real test will be when the cash crunch eases. It is to be seen if people continue to use the e-payment methods. On this count, there are twin sectoral problems.
First, in the urban sector, there is one lot of people who are not in the banking net and are reluctant to move out from the cash transaction system. On the other, there are people who have access to the banking system but do not use their debit or credit cards due to lack of transaction points.
Second, in the organised sector, which accounts for about one-third of the population, and which is also the worst hit, post-demonetisation digital literacy is almost negligent. Training this set of people will be the next big challenge.
A Boston Consulting Group study revealed that at present, rural Indians use the Internet mainly for social network websites (around 70 per cent of the Internet users living in rural areas) such as Facebook, and for emailing. About 15 per cent of the rural consumers use the Internet to research products, purchase a product, or register satisfaction or dissatisfaction with a product after the purchase is made, compared with 30 per cent of urban consumers.
“The amount of actual online commerce in rural India is still small, but it is picking up. From 2015 to 2016, the penetration of online purchasing in these areas doubled from four per cent to eight per cent”, the study noted. The key reasons are “convenience and discounts”, it added. It is, however, expected that by 2020, about 315 million Indians living in rural areas will be connected to the Internet, compared to around 120 million at present.
In light of this, it is encouraging that the Government has already taken efforts to facilitate Aadhar number-enabled financial transactions through mobile phones. Side by side, the Government has planned to build a common mobile phone app that can be used by shopkeepers and merchants for receiving Aadhar-enabled payments, bypassing credit and debit cards, pin and password. A thumb print would be sufficient to make such transactions.
However, the most important fallout of demonetisation is that suddenly, people are finding merit in digital payments, which are all accounted for and traceable. Indeed, be it the chaiwala or the mom-and-pop store or the local sabzi mandi, many have started using cashless facilities. From being an option, e-wallets have become the need of the day.
On the other hand, this move will come as a game-changing opportunity the for e-commerce industry. Following demonetisation, though e-commerce companies have seen a drop in sales owing to the cash crunch, in the true sense they are doing their bit to move towards a cashless economy by offering discounts and organising sales events – some have even closed the cash-on-delivery option for customers. As and when the transition to the digital way of life happens meaningfully, this industry will see massive growth and also generate employment opportunities.
As for e-wallet firms like Mobiwik, Paytm etc, perhaps they will be increasingly the modern-day form of transactions. For them, demonetisation has come as a windfall. An AC Nielsen report said that about 1.2 crore Indians have started using digital wallets, and mobile payments surged to their highest-ever reach at 70 per cent in the week following the withdrawal of Rs 500 and Rs 1,000 denomination notes.
Challenges for the Government are aplenty. It will have to extend the electronic transaction processing platform, Internet connectivity and smart phone accessibility and penetration to the remotest part of the country, in both rural and urban areas. A transition to the digital way of life has to take place gradually. Availability and quality of Internet connection has to be maintained. Poor Internet facilities will lead to failure of transactions, which will discourage people from using digital payment methods. There is also an urgent need to invest in technology so that there are more e-payments modes. People should be offered incentives so that they are lured to make a shift towards digital e-payments. Lucrative schemes and offers can expand the e-consumer base. Levying a surcharge on electronic transactions may come as a setback. Why would people want to pay extra tax when they can transact in case without paying such tax?
Making cyber space more secure is another area that needs attention. Consumers are sceptical about safety and security issues. They worry about their account being hacked.
Moving towards a cashless economy is not an easy task in a nation where cash is king. There will be hitches in the way, but the Government must take the lead to become cashless, to set an example.
(The writer is Assistant Editor, The Pioneer)