In a world that is going digital, cash is still king - AGS India
Eventhoughdigitalpaymentsareontherise,cashcontinuestoholditsthrone. Inaneconomylikeours,wearelikelytocontinuewitnessingthecoexistenceof bothcash&digitalpayments.TheIndianeconomyhasbeeninaconstantstate ofevolution.Fromusingpreciousmetals,cowrieshells,andcurrencynotesto nowintangiblepaymentmodessuchascards,BHIMUPI,QRcodes,andRFID –thepaymentlandscapeisevolvingatarapidpace.However,onemodethat hasstoodthetestoftimeiscash.
WhileIndiahaspredominantlybeenacash-intensiveeconomy,twoeventsmay havechallengedthestatusquo–Demonetisation&Covid-19.Theybrought aboutachangeinpeople’spaymenthabits.Beforedemonetisation,digital paymentswereverynascentinIndia.Injustamatteroffewyears,digital paymentshavegainedextraordinarygrowth,withthevolumeoftransactions increasingataCAGRof36%.
Interestingly,cashincirculationisalsonowabout14.5%ofGDP.Accordingto thedatareleasedbyRBI,aheadofDiwali,thecurrencywithpublicrosebyRs 15,582crore.Onayear-on-yearbasis,ithasincreasedbyRs2.21lakhcrore. Thisisanindicatorthatdespitetherisingdemandfordigitaltransactions,cash hasstillseenanupwardcurve.
Letuslookatvariousreasonsforthisincrease:
65.07%ofIndiansstillresideinruralareas
Indiaisacountrywithawidecustomerbasecomingfromurban,semi-urban, andruralareas.Interestingly,theruralpopulationconstitutesover65%ofthe
totalpopulationofIndia.Whilethepenetrationofdigitalpaymentsisdeepin metrocitiesandsemi-urbanareas,theruralcounterpartscontinuetotransactin cash;forwhichtheyrelyontraditionalchannelssuchasthebankbranchesand ATMs.NewerservicessuchasmicroATMsorCash@PoSareplayingan importantroleinmeetingruralIndia’scashneeds.
AsIndiaisanagrarianeconomy,itisobservedthatcashwithdrawalsincrease duringthecropharvestseason,whichisusuallybetweenMarchandApril.
DirectBenefitTransfer(DBT)
ThevalueoffundtransfersbythemeansofDirectBenefitTransferincreased from₹619.4billionduringfinancialyear2016to₹5,525.2billionduring financialyear2021.Theseschemesenablebeneficiariestoreceivebenefits directlyintotheiraccounts.ThisamountcanonlybewithdrawnusingAePSor ATMs,therebyincreasingthemoneysupplyinthecountry.Moreover,thereare 43.90crorebeneficiariesofthePMJDY(PradhanMantriJanDhanYojana). Theseinitiativeswillresultinincreasedcurrencywiththepublicasmorepeople willcomeunderthesegmentof‘bankedpopulation’.
Thepandemicpush
Duringthelockdown,manypeoplewithdrewlargeamountofcashasa preventivemeasureandtoavoidfrequentvisitstotheATMowingtorestrictions duringnationwidelockdown.Infact,theaverageticketsizeofwithdrawalsat anygiventimewentupbyalmost20percent.Whiledigitalacceptancewas gainingmomentum,thereweremanymerchantswhowerenotequippedtogo ‘digital’completely.Thiscouldbebecauseoffactorslikecostof implementationandlackofawarenessamongmerchants–especiallysmallshop owners&vendors.Hence,customershadcontinuedtomakepaymentsincash fortheirday-to-dayessentials.
Additionally,itwasobservedthatmanyretailersbeganofferingCash@PoS servicestocatertotheincreasingcashneedsoftheircustomers.
Unbankedpopulation
Thereareabout15croreIndianswhostilldonothaveabankaccount. Moreover,manyIndiansaredailywageearners–earningtheirlivelihoodbythe meansofcash.Alltheirday-to-daytransactionstakeplacebythemeansof cash.
Regulatorypolicies
Recently,theMinisterofStateforFinanceBhagwatKaradsaidthatoutofthe 2.13lakhATMsinthecountry,47%areinruralandsemi-urbanareas. Moreover,theRBIhasapprisedallWhiteLabelATMoperatorstodeploy minimum1000ATMsayear.Suchamovewillcatertotheeverydaycashneeds ofcitizensandcashwillcontinuebeingaprimarymodefortransacting.
Growingcyber-securityconcerns
Whiledigitaltransactionshavebeensurging,manyIndiansarestillsceptical aboutmakinglargevaluetransactionsonline.Thisisduetotherising cyber-attacksandfraudsthatdigitalpaymentmodesareexposedto.Asopposed todigitalpayments,cash-basedtransactionsinvolveonlythepayerandthe receiver;hence,manycustomersfeelitissafertopayincash.Inalatestreport bygloballyaleadingfinancialtechnologyplayer,71%respondentsstatedthat theyareconcernedaboutscamsandfraudowingtotheshifttodigitalmethods ofpaymentsduetoCovid-19.Additionally,digitalpaymentfraudsaccountfor abouthalfofallbankfraudcasesinIndia.
Allthesefactorsestablishthateventhoughdigitalpaymentsareontherise,cash continuestoholditsthrone.Inaneconomylikeours,wearelikelytocontinue
witnessingthecoexistenceofbothcash&digitalpayments.Whilethe acceptanceofdigitalpaymentswillgrowatarapidpace,cashwillcontinue beingthemostpreferredmodeformostIndiansinthenearfutureaswell.