A Revolution Called Cashless Service

Jawahar works for a reputed IT services company in New Delhi. He books his household groceries online, travels in an app-based cab service booked and paid online, uses his DMRC smart card whenever he travels by Metro rail, pays for his lunch and dinner through corporate meal cards, for his shopping and domestic bills through e-wallets, enjoys his weekends by booking e-tickets for movies and e-booking travel and lodging for his out station trips. Many other daily commuters in many cities all over India have similar stories to tell.

Technology has never been this smart and reliable. Ten years ago, no one would have believed if you said that the currency notes in the wallets would be of minimal use, and ten years down the line it would seem preposterous to note that there was once a time when we still carried those notes in our wallets. Such is the pace of cashless revolution in our lives that it has inarguably been one of the most decisive, influential and pivotal inventions in the past decade or so.

What is cashless revolution?

Cashless revolution means that the traditional method of payment through currency notes is completely taken over by digital cash or e-cash. The digital money may be online wallets, e-banking, electronic cards and many more forms where there would typically be user authentication of the card or the wallet. This would invariably lead to purely digital transfer of money among the parties involved with minimal or no transfer of cash in the form of physical currency notes.

Indians, as they have been with any technology, are quick to embrace and welcome this path breaking revolution into their living realizing early the abundant advantages it offers. Cashless payment makes the payment process hassle-free, reliable, accountable and more secure since all payments are electronically recorded. Online payments for cabs or autos make travel experience more pleasant saving the time spent in struggling over loose change in the same way in which inception of smart cards made commute faster and smoother in public transportation. Travelling cashless also means lesser prone to risks of thefts, and damage caused due to loss or theft of electronic cards can be largely controlled. The advantage cashless payments provide can be particularly noticed during emergency travel if payments for food, travel and boarding can dynamically be done through on-the-go e-wallets.

The surge in cashless transactions can also be attributed to the penetration of smartphones among the population. India is the second largest smart phone market worldwide and it is predicted that every third person would own a smartphone by 2020. This has enabled ready access to apps which provide easy storage and retrieval of money. Of late, there has also been an increase in awareness towards rapid technological advancements and acceptance towards change among the citizens which also contributes to this revolutionary evolution.

What forms does it take in the economy today?

The big players like PayTM, MobiKwik, PayUMoney are constantly trying to take over the consumer market by offering attractive deals like cashbacks for every payment made using their wallet, where cashback obtained is again digital money credited in the wallet! PayTM for one, which has started as an online retailing website, has grown at a frantic pace through various innovations and collaborations. The facilities offered through its wallet range from booking movie or travel tickets to paying phone or electricity bills at attractive discounts or cashbacks. Recent partnership between Highways Authorities of India (NHAI) and PayTM would also allow cashless toll collection, facilitating seamless journeys on the national highways. Recent mergers of Freecharge by Snapdeal for over Rs.2000 crore and Citrus Pay by PayU for over Rs.800 crore have reiterated the faith that the global markets have in digital cash. While these companies are mainly involved in online wallets, other banking giants like VISA and Mastercard are offering online credit cards to substitute the complications involved in maintaining a physical card, and alleviate the huge risk of bogus transactions associated therewith.

This is still only a silver lining!

For this revolution to completely spread and make inroads, few issues regarding integration of payments need to be addressed reliably. For example, consider a person owing an auto or cab and accepting payment through PayTM wallet. If he makes 15 trips a day, and each trip costs around 50/-, he would be getting around 9000/- a month deposited in his PayTM wallet. But there is an inherent “wallet sink” risk associated with this method, where this accumulation of money is not strategic unless there are enough ways through which he can spend that money. Permitting money deposit in bank account from digital wallet might seem to be a potential solution but it also enables conversion of digital cash such as cashbacks into currency money, which is unacceptable! So a long term solution would be to increase the retails accepting payments through wallets, starting from next door vendors. One more problem is maintenance and handling of a large number of smart cards, which can be combined into a single card represented by unique identification of a person. For example, integration of BMRCL and yet to be introduced BMTC smart cards in Bengaluru would help to solve the “last-leg” problem to a large extent. A hike in the wallet transaction limit, which is currently set by the RBI years ago to 10,000/-, would also help, particularly in cities where cash payments are ubiquitous. Moreover, the cashless technology should not be limited to metro cities alone and should be spread to smaller towns and villages which can be done through massive awareness programs and setting up partnerships with local co-operative banks and finance corporations.

As my favourite columnist rightly noted, it is human tendency to underrate the present and grossly overrate the past. We are a witness to some great inventions happening currently in digital sector which are equivalent to light bulbs, telephones and steam engines of the yesteryears in making our lives more effortless, and electronic cashless transactions is definitely one of them. It is of utmost importance to embrace and put to right use these innovations which would help in progression of lifestyle forward. To fit this shift into a popular catch phrase, “The world is heading towards cashless, where are you? “