New Delhi, March 14, 2017
Millions of small traders who started making and accepting online payments have gone back to cash
Indians love the feel of cold hard cash, demonetisation or not. A blanket ban on old notes, tiresome long queues outside ATMs, fights with bank tellers and other patrons — nothing has managed to come in the way of people and their crisp wads of cash. Going back to old habits, the surge in digital transactions which sustained for a little over two months is fast fading away, as cash is back with a vengeance.
Realising soon that making people go cashless was next to impossible, the government changed its rhetoric to “less-cash”, and has since pushed every type of digital method of money transfer in an effort to coax people to rely less on cash.
The government in the past four months has tried everything from organising massive events such as the “Digi-Dhan Mela” hosted by Prime Minister Narendra Modi, launching new digital ways of transactions including apps such as BHIM, Unstructured Supplementary Service Data (USSD), Bharat QR to even a dedicated television channel called “DigiShala” to educate people in cashless transactions.
The push for digital transactions, use of mobile wallets and the Unified Payments Interface (UPI) started from the very next day of the PM’s note ban speech. Wallet companies such as Paytm and FreeCharge even went on to bring out full-page jacket advertisements congratulating the PM for his “gutsy” move.
Everything, however, has failed to make the paradigm shift which the government expected. According to Reserve Bank of India (RBI) data, cashless transactions have gone down 21.3 per cent in February compared to December last year. From a peak of Rs 104 lakh crore in digital transactions in December, the numbers have gone down to Rs 92.6 lakh crore in monthly cashless operations in February. As ATMs started spewing out cash again, the reliance on digital money went down. In January, the numbers stood at Rs 97 lakh crore.
The government, however, said they are growing strong with the plan of educating people about digitisation and perks such as direct account transfers of incentives on online payments have all helped to increase the less-cash momentum.
According to trade bodies, the reason behind the consistent drop in digital transactions is that the millions of small traders who briefly started making and accepting online payments, went back to cash as soon as currency flow in the market improved.
“Established and larger businessmen who shifted to digital are still on those platforms. However, small traders who started using mobile wallets and other payment gateways went back to cash soon enough. Reasons range from being comfortable with cash to high transaction cost. If the government wants to promote digital, they have to absorb transaction charges,” said Praveen Khandelwal, secretary general, Confederation of All India Traders.
While four major wallet companies in India have claimed a combined 12 million merchants have joined their platforms, transactions have gone down from Rs 2,100 crore in January to Rs 1,870 crore in February.
Experts, however, contest that the numbers are showing a downward trend due to two reasons: “There is an impact due to the lesser number of days in February. Also these numbers do not include the Rs 4,000 crore in money transfers,” said Naveen Surya, chairman, Payments Council of India, and MD, ItzCash.
He added that what demonetisation has managed to do is give a reality check to people, that digital is the way forward. “Cash was always out in full force, but demonetisation has helped the sector which was growing at 30-60 per cent, grow at 60-70 per cent since November last year,” he said.
[The Business Standard]