major and significant move of demonetization by Prime Minister of India, the
next move lies in making India a cashless economy. Demonetization 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 above said 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.
Demonetization, cashless, digital, economy
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 hasbeginwith 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 digitallyauthorized 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
Source : NPCI
ELECTRONIC PAYMENTS ( APRIL 2017)
Value (Rs. Billion)
DEBIT & CREDIT CARDS AT POS
MOBILE DIGITISATION- A BOOST FOR CASHLESS ECONOMY
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 smart
phones can eliminate the necessity for hardwaresupported mountedline
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
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.
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.
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
Number of Transactions (in
Source: Reserve Bank Of India
M-WALLET PLAYERS AND THEIR USER BASE (MILLION) 2016
Source: M-Wallets Assocham Report
SHARE OF 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
There has been an 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.
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 is being done digitally.
the enlargement of digital payment systems in rural areas, the
Central Government unitedly with NABARD can provide
support to any or all the eligible banks for preparation of
two POS devices every in one large interior villages
with population of about ten thousand . Farmers of 1 large
interior village covering a complete population of nearly
seventy five large integer UN agency will have facility
to interact cashlessly in their villages for his or
her agri desires.
service tax are going to be charged on
digital dealings charges/MDR for transactions upto Rs.2000
Payments Interface has been launched by National Payments Corporation
of India (NPCI) to accomplish RBI’s vision of transitioning
towards a “less-cash” and a digital society. A collection of
ordinary application programming interfaces (APIs)
give a practical system for seamless transfers,
and it’s been designed on high of
the cash service (IMPS) platform.
Aayog Committee- The Centre has setup a committee headed by NITI Aayog
corporate executive Amitabh Immanuel Kant to formulate a
technique to expedite the method of
reworking India into a cashless economy. The committee has been asked
to spot and operationalise within the earliest
time-frame easy digital payment choices in all sectors of
the economy. This can be an integral part of the government’s
strategy to remodel India into a cashless economy.
Central Government through NABARD will support Rural Regional Banks
and Cooperative Banks to issue “Rupay Kisan Cards” to 4.32
lakh Kisan mastercard holders to modify them to
form 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 connected entities/corporations to the
passengers, it’ll give a reduction of fifty per cent for
payment of those services through digital means. All the
passengers traveling on railways availing these
services could avail the benefit.
Central Government Departments and Central Public Sector
Undertakings can make sure that transactions fee/MDR
charges related to payment through digital means that shall
not be passed on to the customers and every one such expenses
shall be borne by them. State
Governments are being suggested that the State Governments
and its organizations ought to conjointly envisage to absorb
the dealings fee/MDR charges associated with digital
payment to them.
9. Discountonpolicies sold-out online-Public
sector insurance corporations can give incentive,
by approach of discount or credit, upto ten per cent of the
premium on insurance policies and eight per cent in new life
policies of life Insurance Corporation sold-out through
the client portals, just in case payment is
formed through digital means .
banks are suggested that merchandiser mustn’t be needed to
pay over Rs one hundred per month as monthly rental for PoS
terminals/Micro ATMs/mobile POS. The merchandisers should
bring tiny merchant on board the digital payment eco system. Nearly
6.5 lakh machines by Public Sector Banks are issued to merchants
agencies which are going to be benefitted by the lower rentals and promote
Benefits of cashless transaction
very obvious that everything has its pros and cons. Cashless transaction do has
some. Some of them are.
1.Control over Black Money- Black
cash has become a hazard nowadays. Currently cashless dealings have become
important to manage the black money. Whenever we have a tendency to purchase
any product, the distributors don’t
disclose their financial gain to the govt. and thus don’t pay-off the tax
underneath govt. policies thereby contemplating black money. Any properties
that aren’t underneath govt. policies and also the tax haven’t been paid
constitute the black money.
2. Control over fake note – It is not possible to form
fake notes if the cashless dealings are
employed by every individual within the society . During this state of
affairs the government is making efforts to ensure that all
the dealings are done on-line.
funding to act of terrorism – Funding to the act of terrorism is
completed by the unaccounted cash of the
black cash holders. However cashless dealings can
eradicate black cash , thus no support to act of
No one will store cash with themselves as all
the dealings are done on-line.
So, everyone must pay tax for what they need.
5. Illicit political
Political donation is the major concern within the country.
Majority of the funding within the political parties are
unaccountable , that isn’t disclosed by the parties.
All that sort of illicit dealings would be stopped if
a government follows cashless dealings.
6. Price of printing and distribution of currency – The price of
printing and distribution of currency would be zero for the cashless
dealings as no paper notes need to be printed and distributed.
CHALLENGES IN THE PROCESS OF CASHLESS TRANSACTIONS-
Illiteracy- is one in every of the
foremost issue within the path of cashless group action, as
per United Nations agency report, Asian countries presently has the widest population
of illiterate adults within the world nearby 287 million . India’s is
one of the largest country with illiterate population within the world
says United Nations agency report.
Hacking- is one in every of the problems for cashless group
action as per the Economic times issue 3.2 million debit
cards information were hacked
of the foremost banks like SBI, HDFC, ICICIetc. .
Universal money Inclusion- Despite the success of Jan Dhan Yojana in
rising financial inclusion, it’s been found that the majority of the accounts
are dormant. Twenty three per cent of PMJDY accounts lie empty and are tagged
as zero balance accounts.
Low Penetration of Mobile Banking: The impact of mobile wallets in making
a fast transition from cash to cashless economy is clearly exaggerated. Merely
26% of Asian countries has web access, and there are
only two hundred million users of digital payment services.
Lack of Digital Infrastructure: The first and foremost
requirement of a digital economy is the penetration of internet and smartphone.
Although a billion mobile subscriptions (not users), only 30% of subscribers
use smartphones. With 370 million mobile internet users, over 70% of them are
in cities while 70% of Indian population lives in villages.
High Cash Dependency: India has a high cash penetration
in almost all of its transactions that happen as B2C transactions. Total cash
flow in the market accounts for 12.04% of the GDP, which is among the highest
in developing countries. This goes to show our dependence on cash is acute and
it requires time to tackle it.
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.
Anand, Shefali, (2016), ” Could India become a
Cashless Indian Economy”- Money demonetization
to mobile digitization, Nov 18,2016
Electronic payment System-representative data by
Hogan, Edward J. “System and method for
conducting cashless transactions on a computer network.” U.S. Patent
5,692,132, issued November 25, 1997.
authority if India press release No. 97/2016
Jagadeesan T.S .(2016) “Digital India is beyond
being cash and paperless- A building block for a developed India”
Jain, Liza. “Black Money–a Darker Side of
Economy.” Indian Journal of Applied Research 6, no. 3 (2016).
Jhingan, Sunaina. (2017) , A new way ahead of
Demonetization- Digital and Cashless Economy
Joshi, Abhishek. (2017) , ” Paytm records 1
billion transactions and 147 million wallet users in 2016; Records 80 million
active users in Dec 2016.
NIPFP Tax Research Team. Demonetisation: Impact
on the Economy. No. id: 11481. 2016.
Odumeru, James Adetunji. “Going cashless:
Adoption of mobile banking in Nigeria.” Arabian Journal of Business and
Management Review 1, no. 2 (2013): 9-17.
P. HOTA, ?Cash to cashless economy — the
challenges? The Hindu, Business line,
Press Information Bureau, Govt. of India,
Ministry of finance, 8 Dec,2016, Package for promotion of Digital and cashless
Rawat, S.D. (2016) , “Assocham India, ” M-Wallet
: Scenario Post- Demonetisation”
Rogoff, Kenneth S. Costs and benefits to phasing
out paper currency. No. w20126. National Bureau of Economic Research, 2014.
Saloni Shukla and Pratik Bhakta, ET Bureau Oct
20, 2016 ?3.2 million debit cards compromised? SBI, HDFC Bank, ICICI, YES Bank
and Axis worst hit?.
Singh, Supriya. “Electronic money:
understanding its use to increase the effectiveness of policy.”
Telecommunications Policy 23, no. 10 (1999): 753-773
11 ways in which PM Modi plans to promote a
digital, cashless economy.