Dr Ashwani Mahajan
Cashless payments are no new thing in India; they have been there even in the past. If somebody thought of cashless payment about a decade ago, it was through credit card, debit card or very cumbersome wired transactions. Even credit card system was not based on India’s own payment system. There were 3 big international companies with brand names visa, master card and Maestro. Though in the past, credit cards used to be issued by commercial banks; however they were generally tied to these international giants. Before the introduction of ATMs, people had to go to their respective bank branches to withdraw cash. Time changed and now people use ATMs to withdraw cash and can also transfer the money to other accounts by way of internet or ATMs.
Due to non-availability of new currency in sufficient quantity, after demonetisation of rupees 500 and 1000 currency notes, post November 8, 2016 people turned to some cashless methods of transactions though under compulsion. PM says that now your mobile is also your bank. One can download apps on smart phone and enjoy the facility to know balance and make transactions. Along with that one can make bill payments or even transfer money. Some new payment systems have also emerged on the scene like Paytm, freecharge etc. They are called prepaid payment instruments (PPIs), which are allowed to be floated by RBI under some conditions. Now when you go to market, you don’t need to keep cash in your wallet, as you can carry e-wallet in your mobile. Small shopkeepers, who don’t keep swipe machines, have started getting payments through these e-wallets.
Technology is the key
All this has been made possible because of technology. Financial services have entered into our mobile. With the help of the new payment instruments, now online shopping and online payments has been made possible. Today 90 percent of our households have a bank account, through which subsidy can be (and is being) sent directly to the bank account of the beneficiary. So far nearly 26 crore zero balance Jandhan Accounts have been opened. All account holders are eligible to get an ATM card and can withdraw money from any of the 2.5 lakh ATMs throughout the country.
Today we have 104 core mobile connections, which shows that our tele density has crossed 80 percent and 37 percent of these mobile customers are using internet. This shows that today we have a strong base to go for cashless transaction system. However, major limitation comes from illiteracy and lack of internet and power supply in rural areas.
Government’s Efforts
Narendra Modi’s Central Government has been making all efforts to promote cashless transactions. Since this Government has taken charge, so far 35 crore RuPay debit cards have been issued, based on indigenous payment gateway. It is notable that before the introduction of RuPay card, all debit and credit cards used to be issued in arrangement with foreign service providers like Visa, Master Card, Maestro etc., and these companies used to charge and transfer huge money in the name of fees. In the last few days many new schemes have been launched by the Government and banks for cashless transactions. There is a new scheme in the name of Unified Payment Interface (UPI) which can give a big boost to the cashless transactions, as with this money can be transfer from one bank to another.
Cashless Transactions are Risky Too
In the past on the one hand use of debit and credit cards has been increasing very fast, so are the risks attached to the same. In the month of October, 2016 hackers managed to steal secret information pertaining to nearly 32 lakh debit cards and money was stolen from many cards. Banks like State Bank of India, ICICI and HDFC were the worst hit. In the recent past news have been coming in about sharing of secret information of the customers of prepaid payment instruments like Paytm and others as these companies have Chinese investments and technical support. Therefore cashless transactions are being seen confronted with huge risks.
We generally hear about hacking of twitter handles and emails. Under these circumstances there is a big question mark about the security of cashless transaction, which is being promoted. If we want to bring in efficiencies in the form of cashless transactions, these problems are equally important to deal with. Though, according to the data published in July 2016 a total of 88 crore transactions took place with the help of ATMs and POS terminals (swipe machines), however 92 percent of these transactions were in the form of cash withdrawal from ATMs. With ATM related problems coming to the fore, after demonetisation, there is a big question mark on the role of ATMs in cashless transactions.
Cash is here to Stay
In developed countries mostly day to day transactions are cashless; however, in India hardly 2 percent transactions are cashless. Due to shortage of currency these days’ people are compelled to make payments through e-wallet, prepaid payment instruments, Credit and Debit cards etc. However those who are not habitual to these kinds of transactions, they are facing huge problems. In our country, generally people have the habit of making cash transactions. In developed countries payment habits have changed gradually. In India too these habits may change but only slowly. Although Government has been pushing cashless transactions, however along with this equally important is to enact appropriate cyber laws to deal with problems and crimes related to cashless transactions. Most of our financial transactions are on foreign operating systems, which are not fully secured. All most all our transactions are made on servers located outside the country. Therefore it is a big challenge for the Government to understand and solve the problems related to cashless transactions and develop indigenous systems.
(The author is Associate Professor, PGDAV College, University of Delhi)
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