ABSTRACTAftera major and significant move of demonetization by Prime Minister of India, thenext move lies in making India a cashless economy.
Demonetisation has paved the way for growth of digitalfinance in our country. Following this move, Indian government and severalprivate players collaborated on initiatives to increase the usage of digitalpayments across the country. Though India is a country where 97% transactionswere being done through cash, it is majorly a cash dependent economy , yet abig transformation is being seen nowadays with more and more population usingalternate payment methods such as digital wallets, banking apps etc.With thegrowing trend of digital payments through E- payment systems, Paytm, mobilewallets, the effort is to reduce corruption and fraudulent practices in thecountry. The current study aims at studying the different perspectives of cashless economy including thechallenges that needs to be faced and the ways to overcome them. This paper examines issues in this economicpolicy drift. The findings of the study revealed that the stakeholders who areagainst the abovesaid move were mainly due to the reason that they are moretrapped in cash based system and high rate of illiteracy, inconvenienceassociated with digital payments.
Keywords:Demonetisation, cashless, digital, economy INTRODUCTIONAs a consequence of the cancellation ofthe tender character of recent five hundred and one thousand notes, there has been a surge within the digital transactions through use of credit/debit cardsand portable applications/e-wallets etc. To additionally accelerate this method, the CentralGovernment has begin with varied incentive packages and measures for promotion ofdigital and cashless economy within the country. Digital Indiacouldbe 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 Indiainto 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 ofIndia into less-cash society, varied modes of digitalpayments are out there like Banking cards, USSD (the Unstructured SupplementaryService 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). IndianGovernment is aiming to create the country a cleaner, more transparent economy byadopting digitalization as a mode tocreate an amicable climate for foreign trade, boost economic activity, andultimately lead the country to the another level of heights amongst emergingeconomies.
Source : NPCIELECTRONIC 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 MOBILEDIGITISATION- A BOOST FOR CASHLESS ECONOMYWith the result of ban of INR one hundred and lesser denomination notes previously in circulation, India Government has suddenly felt anincrease 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 havestruggled to scale-up due to the fragmented nature of theretail 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 throughbusiness 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 INDIAAccording to research analystsby 2018 , the country can witness an upsurge in mobile wallet market thatis expected to grow at a CAGR of 140%, while the global mobile walletmarket will manifest a growth of CAGRof 34% by 2020.
The reason for thefact is that India is one of thefastest-growing markets for smartphones in the world. It is expected to reachat the level of the second largest market by the end of 2017 – replacing the United States. The numberof mobile internet users in India is expected to touch 314 million by 2017, upfrom 280 million now.According to a recent reportby GrowthPraxis, the market for mobile-enabled payments in India grew morethan 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 ontheir mobile phones – in marked contrast to many other countries, where desktopand laptop are the first web-enabled devices that people use.CHANGING TRENDS In the comingtimes, Cash is all set to lose its existence in India, due to increase insmartphone usage among masses in the country driving a boom in the digitalpayments system. By 2020, it is expected that nearly $500 billion worth oftransactions in India will be processed digitally via online and mobile wallets and other digital-paymentsystems which is 10 times the current level, according to a report by GoogleIndia and The Boston Consulting Group. Number of Transactions (inmillions)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 2016Paytm hasalso 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 nowwitnessing about 7 million daily transactions worth about Rs 120 crore, helpingit cross $ 5 bn Gross Merchandise Value (GMV) sales, four months ahead of itstarget. Last year, Paytm’s GMVwas at $3 bn. GOVERNMENT INITIATIVESFOR MAKING INDIAN ECONOMY CASHLESSTherehas been a increase in the digital transactions through use of credit cards, debitcards and mobile phone applications, e-wallets etc. To further accelerate thisprocess, the Central Government has decided to launch a group of incentives andmeasures for promotion of digital and cashless economy in India.Theseincentives/measures include:1. TheCentral Government Petroleum PSUs have decided to give an incentive by giving adiscount of 0.75% of the sale price to consumers on purchase of petrol/dieselif the payment isbeing done digitally.
2. For the expansion of digital payment systems in rural areas, theCentral Government in collaboration with NABARD will give financial support to allthe eligible banks for deployment of 2 POS devices each in 1 Lakh villages withpopulation of less than 10,000. This will benefit farmers of one lakh villagecovering a total population of nearly 75 crore who will have facility totransact cashlessly in their villages for their agri needs. 3.
Noservice tax will be charged on digital transaction charges/MDR for transactionsupto Rs.2000 per transaction. 4. Unified Payments Interfacehas been launched by National Payments Corporation of India (NPCI) to furtherRBI’s vision of transitioning towards a “less-cash” and more digital society. Aset of standard application programming interfaces (APIs) provide aninteroperable system for seamless transfers, and it has been built on top ofthe immediate payment service (IMPS) platform.5. NITI Aayog Committee- TheCentre has setup a committee headed by NITI Aayog CEO Amitabh Kant, toformulate a strategy to expedite the process of transforming India into a cashlesseconomy.
The committee has been asked to identify and operationalise in theearliest possible time frame user-friendly digital payment options in allsectors of the economy. This is an integral component of the government’sstrategy to transform India into a cashless economy.6. TheCentral Government through NABARD will also support Rural Regional Banks andCooperative Banks to issue “Rupay Kisan Cards” to 4.32 crore Kisan Credit Cardholders to enable them to make digital transactions at POS machines/MicroATMs/ATMs.
7. Forpaid services e.g. catering, accommodation, retiring rooms etc. being offeredby railways through its affiliated entities/corporations to the passengers, itwill provide a discount of 5% for payment of these services through digitalmeans.All the passengers travelling on railways availing these services mayavail the benefit.
8. TheCentral Government Departments and Central Public Sector Undertakings willensure that transactions fee/MDR charges associated with payment throughdigital means shall not be passed on to the consumers and all such expensesshall be borne by them. State Governments are being advised that the StateGovernments and its organizations should also consider to absorb thetransaction fee/MDR charges related to digital payment to them and consumershould not be asked to bear it. 9. Discounton policies sold online- Public sector insurancecompanies will provide incentive, by way of discount or credit, upto 10 percent of the premium in general insurance policies and 8 per cent in new lifepolicies of Life Insurance Corporation sold through the customer portals, incase payment is made through digital means.10. Publicsector banks are advised that merchant should not be required to pay more thanRs 100 per month as monthly rental for PoS terminals/Micro ATMs/mobile POS fromthe 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 merchantswho will be benefitted by the lower rentals and promote digital transactions. Benefits of cashlesstransaction It is very obvious thateverything has its pros and cons. Cashless transaction do has some. Some ofthem are.1. Control over black money Black money has become a hazardnow a day’s cashless transaction become very important to control the blackmoney. Whenever we buy any product, the distributer do not disclose theirincome to the government and hence escape from given the tax that money do notcome under government surveillance hence consider black money.
Any propertieswhich are not under government surveillance and the tax have not been paid forthat is the black money. 2. Control overfake note It is impossibleto make fake noted if the cashless transaction is used by every individual inthe society because notes becomes useless. In this situation all thetransaction will be done online. 3. No fundingto terrorism Funding to theterrorism is done by the unaccounted money by the black money holders. Butcashless transaction will eradicate black money as well as fake currency henceno support to terrorism.
4. Tax payment No one can storemoney with themselves as all the transaction will be done online. So, everybodyhas to pay tax for what they have.
5. Illegalpolitical funding Political donationis the major concern in the country. Majority of the funding in the politicalparty 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 cashlesstransaction. 6.
Cost ofprinting and distribution of currency -The cost of printing anddistribution of currency would be zero for the cashless transaction as no papernotes to print and distribute. CHALLENGES IN THE PROCESS OFCASHLESS TRANSACTIONS-As per TRAI thetotal telephone subscriber (in million) are 1058.85 sill it is not in the rangeof all the people.
The existing telephone infrastructure is not covering allthe area. · Insufficient infrastructure is also a majorbarricade for cashless transaction. For a Large country like India, there areonly 2.
3 lakh ATMs and 14 lakh POS terminals are very low. Countries such asBrazil, Australia, France and the UK have POS terminals three or four timesthat of India. Also the customer awareness drive is virtually missing. Theregulatory framework for card payment is sound. The current business model ofcard payment is also under pressure · Illiteracy is one of the major issue in the pathof cashless transaction, as per UNESCO report India currently has the largestpopulation of illiterate adults in the world with 287 million .
India’silliterate population largest in the world says UNESCO report. · Hacking is one of the issues forcashless transaction as per the Economic time 3.2 million debit cards informationwere 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, ithas been found that most accounts have been dormant. 23% of PMJDY accounts lie emptyand have been labelled as zero-balance accounts.· Low Penetration of Mobile Banking:The impact of mobile wallets in hastening the transition to a cashless economyis clearly overstated.
Merely26% of India has internet access, and thereare only 200 million users of digital payment services CONCLUSIONThecurrent scenario across the country is a mix of cash and cashless transactions.Many efforts are being made in this direction towards turning the economy intoa cashless and paperless economy. Despite of the big initiatives that are beingtaken towards becoming a cashless economy; it will take more than a decade toshift from cash to cashless economy. Rushing the economy into a cashless statewithout adequate planning and infrastructure will be disastrous for the countryand its consequences will be bad.
A gradual approach towards cashless societyas proposed by the Prime Minister is the right way to achieve the goal. Ifwe look at the overall scenario of establishing the cashless economy, itsbenefits and uses in the present system ,it can be said that cashless economyis the need of the hour. It has become not only important but necessary for thecountry to go cashless for the systematic development in the economy.