With the sales of smartphones shooting up day by day and with increasing awareness about the advantages of cashless transactions, the dawn of a cashless society is not too far.
Developments triggered by technology in payment and settlement systems have been significant in recent years. There has been a spike in cashless transactions with the advent of technology.
Finance Minister, Arun Jaitley, in his budget speech had talked about making India a cashless society- a society where use of cash is replaced by use of credit cards, charge cards, cheques or wireless communication payments made from smartphones.
Data from Reserve Bank of India reveals that the value of mobile banking transactions jumped 46% to Rs 49,029 crore in December, 2015 from the previous month. State Bank of India, leads mobile banking transactions with over 1.5 crore mobile transactions in December 2015. The data unveils that SBI constitutes 38% of the mobile banking transactions in India which collectively amounts to Rs 17.6 crore.
So what is the reason for the surge in mobile banking transactions? The smartphone mania that has swept the subcontinent can be attributed as the major reason for the spurt in mobile transactions.
Banks are increasingly encouraging customers to manage their finances using mobile phones. This simplifies the process for both the parties - banks as well as customers.
The card scheme with its ubiquitous acceptance network has paved way for widespread online transactions too. Rajesh Prasad, VP and Head at Rupay, NPCI, speaking at a Philip Capital event that focussed on rural economy powering India’s growth says, “ India will continue to see card-based transactions for some more time. Some areas in card-based transactions are still untapped.”
Another format of electronic transactions that has taken of are payments made through Electronic Clearing Service (ECS) rather than by cash. Cashless payment system debits the exact bill amount without any extra cost making it easier and quicker for the consumers.
Even in the e-commerce space, there is a rise in number of consumers willing to do cashless transactions though cash-on-delivery was the preferred mode of transaction earlier. The role of reward points and discounts in attracting consumers can’t be neglected either.
Though cashless transaction has its own share of advantages, credit card penetration is still low. The lack of infrastructure in the hands of the retailers and service providers who belong to the informal sector wards off consumers from paying by credit or debit cards.The benefit of cashless transactions is still not evident to those who have credit cards. It has not been able to overcome the belief that having cash gives an upper-hand in negotiation.
Another challenge is that cash and card users fear of being charged more if they use cards for transactions. Ignorance about the benefits of credit cards is another hindrance in embracing cashless transactions.
However with the sales of smartphones shooting up day by day and with increasing awareness about the advantages of cashless transactions, the dawn of a cashless society is not too far.