Going Cashless in India; Where We Are and Where We Could Be

Image Source: CNBC

Image Source: CNBC

The Indian Payments Industry has grown substantially over the years. The transition from cash to electronic is irreversible and Indian consumers are clearly savouring the convenience of electronic payments.

Now, while this pace of growth is good, it still isn’t good enough. Indian e- payment transactions are less than 5% of China and 2 % of the U.S. The positive factor is that, the recent budget acknowledged the role of cashless transactions in curbing corruption among other benefits. The most significant of those is providing access to cash and credit to the India’s rural markets and consumers.

E-payment is the cheapest mode of moving money. It helps in delivering low cost loans and credit to India’s villages and provides a cheap channel for recovery as well.  Small individual loans can collectively bring about quantifiable social. This is where simple mobile apps and digital payments offer clear solutions.

International studies have shown that the growth of e-payments has a direct correlation with the economic growth of a country. This growth in GDP exists irrespective of whether the country is a credit or debit card society. E-payments spur retail purchase transactions as consumers lap up the convenience it offers over cash.

On the other hand, analysts estimate that the total cost incurred by an economy just to maintain a cash-based payment system can be as much as 2% of the GDP. E-payment networks have the potential to provide savings of at least 1% of the GDP annually over paper-based systems via increased velocity, reduced friction and lower costs.

The Modi government has put the spotlight on corruption and the need to use digital payments. Cash based economies support criminal activities such as counterfeiting and encourage a culture of bribes. E-payments make such practices virtually impossible, as cashless transactions are easier to document and track. E-payments are transparent, making it possible to track a higher proportion of financial flows in the total economy.

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This improves the nation’s monetary control, its revenue-collection base and reduces the possibility of tax evasion.The budget’s intent is fantastic and needs to be followed up with clear actions. There should be no extra taxes for e-payment transactions, current service tax on e-payments should be done away and retailers should be incentivized.

These measures were put in practice by Korea leading to 60% digital retail transactions. The Indian Internet and mobile payments industry has strongly driven retail transactions and welcomes measures thaturge consumers to use e-payments over cash on delivery.

Indian consumers will “Go Cashless”. It’s now up to the government and regulators to accelerate the process because, we are ready.

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