On the same day that Facebook gave us more ways to “Like” something, the Union Cabinet gave us something to “Like”. To celebrate this happy coincidence we thought we could use our newly acquired emotions to figure out how we feel about this new developments in card and digital payments.
A recent report stated that in India 98% of consumer transactions by volume happen in cash. Compare this to 14% in the United States. It is also estimated that the banking system in India spends a total of 21,000 Cr INR in currency operations costs annually. That is more than Bhutan’s GDP.
Just yesterday, the Union Cabinet approved a host of steps that will help reduce the volume of cash transactions in the economy. And it’s no surprise that this push has come at a time when the Prime Minister is gunning for a Digital India.
To promote payments through cards and digital means various steps have been proposed, prominently –
- Withdrawal of surcharge, service charge and convenience fee on card and digital payments.
- Migration of government payments and collections to a cashless mode
- Mandating payments beyond a prescribed threshold only by card or digital mode
Other measures like MDR rationalization, redressal mechanism for fraudulent transactions etc. will also go a long way in creating a truly digital ecosystem. But most importantly, we now have the intent in place and it’s a clear signal to the market and the international community.
The major focus of this initiative will be to bring complete transparency in the way we all spend our money and to enable effective tax compliance. At an individual level, the greatest benefit of digital transactions is not having to carry cash at all times, while at the national level, the benefit will come in the form of transaction history [for tax compliance] and a much lower cost of managing cash in the economy.
After enabling practically every citizen to have access to bank accounts (think payment banks, small finance banks) the government now wants to concentrate on electronic transfer of subsidies and other forms of grants, however the consumer must reciprocate this by also shifting majorly to digital transactions for their day to day expenses.
We have moved from rank 134 to 130 on ease of ease of doing business globally. We need to hit the double digits if we are to meet our own expectations. Since some of the biggest roadblocks to this will now be done away with, we could be looking at the Digital Revolution 2.0.
Post Written By:- Aditi Sholapurkar ( Paytm Payments Bank | Marketplace)