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ABSTRACT

After
a major and significant move of demonetization by Prime Minister of India, the
next move lies in making India a cashless economy. Demonetisation  has paved the way for growth of digital
finance in our country. Following this move, Indian government and several
private players collaborated on initiatives to increase the usage of digital
payments across the country. Though India is a country where 97% transactions
were being done through cash, it is majorly a cash dependent economy , yet a
big transformation is being seen nowadays with more and more population using
alternate payment methods such as digital wallets, banking apps etc.With the
growing trend of digital payments through E- payment systems, Paytm, mobile
wallets, the effort is to reduce corruption and fraudulent practices in the
country. The current study aims at 
studying the different perspectives of cashless economy including the
challenges that needs to be faced and 
the ways to overcome them. This paper examines issues in this economic
policy drift. The findings of the study revealed that the stakeholders who are
against the abovesaid  move were  mainly due to the reason that they are more
trapped in cash based system and high rate of illiteracy, inconvenience
associated with digital payments.

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Keywords:
Demonetisation, cashless, digital, economy

 

 

 

 

 

 

INTRODUCTION

As a consequence of the cancellation of
the tender character of recent  five hundred and  one thousand notes, there has been a surge within the digital transactions through use of credit/debit cards
and portable applications/e-wallets etc. To  additionally  accelerate this method, the Central
Government has begin with varied incentive packages and measures for promotion of
digital and cashless economy within the country. Digital India
could
be a  programme initiated  to  arrange  India for a  better  future. 
The Digital India  programme 
could be a leading programme of the Govt of India with a vision to remodel India
into a digitally authorized society and data economy.
“Faceless, Paperless, Cashless” is one in every of expressed role of Digital Republic of India. As an aim of promoting cashless transactions and  changing  Republic of
India 
into less-cash society, varied modes of digital
payments are  out there like Banking cards, USSD (the Unstructured Supplementary
Service Data), AEPS (Aadhaar Enabled Payment System), UPI, Mobile wallets,
Banks Pre-paid Cards, Points of Sale, Net Banking,
Mobile Banking and small ATMs. ( Sunaina Jhingan, 2016). Indian
Government is aiming to create the country a cleaner, more transparent economy by
adopting digitalization as a mode  to
create an amicable climate for foreign trade, boost economic activity, and
ultimately lead the country to the another level of heights amongst emerging
economies.

Source : NPCI

ELECTRONIC PAYMENTS (
APRIL 2017)

 

Volume (Billion)

Value (Rs. Billion)

RTGS

9.5

88512.2

NEFT

143.2

12156.2

CTS

95.3

6990.6

IMPS

65.1

562.1

NACH

212.6

905.2

UPI

6.9

22.0

USSD

188.9

301650.5

DEBIT & CREDIT
CARDS AT POS

231.1

431.4

PPI

89.2

22.3

MOBILE BANKING

61

1443.8

TOTAL

853.1

109602.2

Source:
NPCI

 

MOBILE
DIGITISATION-  A  BOOST FOR CASHLESS ECONOMY

With the result of ban of INR  one hundred and lesser denomination notes previously in circulation,  India  Government  has suddenly felt an
increase in  on-line transactions by the people 
in the form of card payments and mobile wallets to handle their daily expenses. However in contrast to rest of the economies where card payments or plastic money  are the major  source of payment modes  used for daily use, card payments have
struggled to scale-up  due  to the fragmented nature of the
retail sector. In such a state of affairs, mobile as a platform, features a distinctive set of capabilities that may overcome the challenges expose by the Indian payments landscape. Mobiles provide a cheap means that to make money access and payments. It will extend the last-mile reach of banking services either through
business correspondents or  on to the tip shoppers., enhancements within the  telecommunication infrastructure, access to web  property and cheap  smartphones can eliminate the necessity  for hardware supported mounted line connections. Mobile may be a platform that unambiguously combines digital identity, digital price and digital authentication to make cheap access to money services.

 

 

FUTURE OF MOBILE WALLETS IN INDIA

According to research analysts
by 2018 , the country can witness an upsurge in mobile wallet market that
is expected to grow at a CAGR of 140%, while the global mobile wallet
market will manifest a  growth of  CAGR
of 34% by 2020. The reason for  the
fact is  that India is one of the
fastest-growing markets for smartphones in the world. It is expected to reach
at the level of the second largest market by the end of  2017 – replacing the United States. The number
of mobile internet users in India is expected to touch 314 million by 2017, up
from 280 million now.

According to a recent report
by GrowthPraxis, the market for mobile-enabled payments in India grew more
than fifteen times between 2012 and 2015 to reach its current size of $1.4bn.
Interestingly, nearly 60% of users accessed the internet for the first time on
their mobile phones – in marked contrast to many other countries, where desktop
and laptop are the first web-enabled devices that people use.

CHANGING TRENDS

 

In the coming
times, Cash is all set to lose its existence in India, due to increase in
smartphone usage among masses in the country driving a boom in the digital
payments system. By 2020, it is expected that nearly $500 billion worth of
transactions in India will be processed digitally via online  and mobile wallets and other digital-payment
systems which is 10 times the current level, according to a report by Google
India and The Boston Consulting Group.

 

 

 

 

 

 

 

 

Number of Transactions (in
millions)

Source:  Reserve Bank Of India

 

 

LEADIMG M-WALLET PLAYERS AND THEIR USER BASE (MILLION)
2016

                                                                                                             
(in millions)

Pay
Tm

120

ITZ
Cash

40

Mobikwik

30

Citrus
Pay

21

Oxigen

20

Vodafone
M-Pesa

5.4

Airtel
Money

1.7

ICICI
Pockets

NA

Source:  M-Wallets Assocham Report

 

MARKET SHARE OF PAYTM

Paytm
also recorded a whopping 1 billion transactions in 2016, which so far has
not been achieved by any of its competitors.147 million transacting users in 2016
200 million unique visitors on
the app and the web combined
2 billion user sessions
80 million monthly active users
in December 2016

Paytm has
also 89% of the mobile share in the market, with 70% coming from Android, 4%
from iOS, 11% from desktop, 14% from mobile web and 1% from Windows OS.
Compared to last year’s 72%, the share has increased a lot.

The company is now
witnessing about 7 million daily transactions worth about Rs 120 crore, helping
it cross $ 5 bn Gross Merchandise Value (GMV) sales, four months ahead of its
target. Last year, Paytm’s GMVwas at $3 bn.

 

 

 

GOVERNMENT INITIATIVES
FOR MAKING INDIAN ECONOMY CASHLESS

There
has been a increase in the digital transactions through use of credit cards, debit
cards and mobile phone applications, e-wallets etc. To further accelerate this
process, the Central Government has decided to launch a group of incentives and
measures for promotion of digital and cashless economy in India.

These
incentives/measures include:

1.     
The
Central Government Petroleum PSUs have decided to give an incentive by giving a
discount of 0.75% of the sale price to consumers on purchase of petrol/diesel
if the payment isbeing done digitally.

2.     For the expansion of  digital payment systems in rural areas, the
Central Government in collaboration with NABARD will give financial support to all
the eligible banks for deployment of 2 POS devices each in 1 Lakh villages with
population of less than 10,000. This will benefit farmers of one lakh village
covering a total population of nearly 75 crore who will have facility to
transact cashlessly in their villages for their agri needs.

3.    
No
service tax will be charged on digital transaction charges/MDR for transactions
upto Rs.2000 per transaction.

4.     
Unified Payments Interface
has been launched by National Payments Corporation of India (NPCI) to further
RBI’s vision of transitioning towards a “less-cash” and more digital society. A
set of standard application programming interfaces (APIs) provide an
interoperable system for seamless transfers, and it has been built on top of
the immediate payment service (IMPS) platform.

5.     
NITI Aayog Committee- The
Centre has setup a committee headed by NITI Aayog CEO Amitabh Kant, to
formulate a strategy to expedite the process of transforming India into a cashless
economy. The committee has been asked to identify and operationalise in the
earliest possible time frame user-friendly digital payment options in all
sectors of the economy. This is an integral component of the government’s
strategy to transform India into a cashless economy.

6.     
The
Central Government through NABARD will also support Rural Regional Banks and
Cooperative Banks to issue “Rupay Kisan Cards” to 4.32 crore Kisan Credit Card
holders to enable them to make digital transactions at POS machines/Micro
ATMs/ATMs.

7.     
For
paid services e.g. catering, accommodation, retiring rooms etc. being offered
by railways through its affiliated entities/corporations to the passengers, it
will provide a discount of 5% for payment of these services through digital
means.All the passengers travelling on railways availing these services may
avail the benefit.

8.     
The
Central Government Departments and Central Public Sector Undertakings will
ensure that transactions fee/MDR charges associated with payment through
digital means shall not be passed on to the consumers and all such expenses
shall be borne by them. State Governments are being advised that the State
Governments and its organizations should also consider to absorb the
transaction fee/MDR charges related to digital payment to them and consumer
should not be asked to bear it.

9.      Discount
on policies sold online- Public sector insurance
companies will provide incentive, by way of discount or credit, upto 10 per
cent of the premium in general insurance policies and 8 per cent in new life
policies of Life Insurance Corporation sold through the customer portals, in
case payment is made through digital means.

10.  Public
sector banks are advised that merchant should not be required to pay more than
Rs 100 per month as monthly rental for PoS terminals/Micro ATMs/mobile POS from
the merchants to bring small merchant on board the digital payment eco system.
Nearly 6.5 lakh machines by Public Sector Banks have been issued to merchants
who will be benefitted by the lower rentals and promote digital transactions.

 

 

 

Benefits of cashless
transaction

It is very obvious that
everything has its pros and cons. Cashless transaction do has some. Some of
them are.

1.     
Control over black money

Black money has become a hazard
now a day’s cashless transaction become very important to control the black
money. Whenever we buy any product, the distributer do not disclose their
income to the government and hence escape from given the tax that money do not
come under government surveillance hence consider black money. Any properties
which are not under government surveillance and the tax have not been paid for
that is the black money.

2. Control over
fake note

It is impossible
to make fake noted if the cashless transaction is used by every individual in
the society because notes becomes useless. In this situation all the
transaction will be done online.

3. No funding
to terrorism

Funding to the
terrorism is done by the unaccounted money by the black money holders. But
cashless transaction will eradicate black money as well as fake currency hence
no support to terrorism.

4. Tax payment

No one can store
money with themselves as all the transaction will be done online. So, everybody
has to pay tax for what they have.

5. Illegal
political funding

Political donation
is the major concern in the country. Majority of the funding in the political
party is unaccountable which is not revealed by the party as well as the donor.
All that kind of illegal transaction would be stopped if a government follows cashless
transaction.

6. Cost of
printing and distribution of currency -The cost of printing and
distribution of currency would be zero for the cashless transaction as no paper
notes to print and distribute.

 

 

CHALLENGES IN THE PROCESS OF
CASHLESS TRANSACTIONS-

As per TRAI the
total telephone subscriber (in million) are 1058.85 sill it is not in the range
of all the people. The existing telephone infrastructure is not covering all
the area.

·        
Insufficient infrastructure is also a major
barricade for cashless transaction. For a Large country like India, there are
only 2.3 lakh ATMs and 14 lakh POS terminals are very low. Countries such as
Brazil, Australia, France and the UK have POS terminals three or four times
that of India. Also the customer awareness drive is virtually missing. The
regulatory framework for card payment is sound. The current business model of
card payment is also under pressure

·        
Illiteracy is one of the major issue in the path
of cashless transaction, as per UNESCO report India currently has the largest
population of illiterate adults in the world with 287 million . India’s
illiterate population largest in the world says UNESCO report.

·        
Hacking is one of the issues for
cashless transaction as per the Economic time 3.2 million debit cards information
were compromised of the major banks such as SBI, HDFC, YES and AXIS .

·        
Universal Financial Inclusion
– Despite the success of Jan Dhan Yojana in improving financial inclusion, it
has been found that most accounts have been dormant. 23% of PMJDY accounts lie empty
and have been labelled as zero-balance accounts.

·        
Low Penetration of Mobile Banking:
The impact of mobile wallets in hastening the transition to a cashless economy
is clearly overstated. Merely26% of India has internet access, and there
are only 200 million users of digital payment services

 

 CONCLUSION

The
current scenario across the country is a mix of cash and cashless transactions.
Many efforts are being made in this direction towards turning the economy into
a cashless and paperless economy. Despite of the big initiatives that are being
taken towards becoming a cashless economy; it will take more than a decade to
shift from cash to cashless economy. Rushing the economy into a cashless state
without adequate planning and infrastructure will be disastrous for the country
and its consequences will be bad. A gradual approach towards cashless society
as proposed by the Prime Minister is the right way to achieve the goal. If
we look at the overall scenario of establishing the cashless economy, its
benefits and uses in the present system ,it can be said that cashless economy
is the need of the hour. It has become not only important but necessary for the
country to go cashless for the systematic development in the economy.

 

                         

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