Mobile, Technology

Barriers and Catalysts in Journey towards Cashless Economy


This guest column is by Transaction Banking Specialist, Abhishant Pant

As per the annual report of Reserve Bank of India (RBI) for 2015-16, the value of banknotes in circulation was Rs 16,415 billion showing an increase of 14.9% as against 11.4% in 2014-15.

The overall benefit of migrating to cashless even by liberal estimates is 0.8 % on GDP in emerging markets.

Key players in this Journey are

  1. Retailer (Point of Sale)
  2. Consumer
  3. Business (Issuers/Acquirers)
  4. G2P and P2G payments.

Retailer (Point of Sale): In digital economies the POS terminal penetration stands between 30-50 terminals per 1000 person while in India it is .9 terminals per 1000. Arguably it can be said that the presence of POS terminals is directly proportional in driving the business and consumer cashless (Though it does suffer from the chicken and egg phenomenon).

At the current stage in Indian economy below mentioned are the barriers and motivators which if addressed suitably can catalyse the growth in terminals.


  • 2 Factor Authentication (For payment’s less than Rs. 2,000): For all retail consumer payments (Grocery/Mass Transportation/ Restaurant/ Local travel by Taxi/Cab) the need for 2 factor authentication increases the chances of drop in transaction processing.
  • Interoperability of wallets: The ability to pay from one wallet (m-pesa) to another wallet (Paytm).
  • Parallel cash economy: 25.1 % was the size of parallel economy as per 2006 (World bank research) estimate, most experts (as per newspaper reports) believe today it will be in the range of 30-35 %. The disadvantage in making the unaccounted (no tax liability) money account is a big road block in retailer participation.
  • Poor digital ecosystem beyond tier 1 cities
  • Cost of Devices and Rentals: The current cost of devices range’s from Rs. 5-10K dependent upon the type of instrument, also in cases of small retailers the device company charges for a monthly rental.
  • Lack of activated (Debit card) consumers in Tier-II and Below): A large portion of consumer’s have received debit card in recent times however the lack of handholding to ensure usage has resulted in non-active debit cards.

Motivators and Catalysts

  • Tax Incentives: Globally Tax incentives are considered as one of the key influencers in getting an outlet started to accept digital means of making payment.
  • Existing Infra usage: Ability to transact on exiting POS / mobile phones for all type of new payment instruments
  • Safe, Secure and seamless: Digitised cash is more secure, auditable, safe and flows seamlessly in the bank account.
  • Incremental Footfall: Resulting in greater business.
  • Loans: Loan against card receivables can provide working capital during the period when it is needed the most.
  • UPI: Unified Payment Interface will enable more digital transactions

Clearly a switch providing interoperability among various type of wallets is observed as the biggest enabler in making it financially viable business model for the retail point of sale.

This article is written to share my personal opinions on the cashless journey and in no way represent the views of the organizations for which I work.

Image Credit: Ibtimes

Have content to share? Share with us for review