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  • 4 Things to know about India’s shift to cashless economy

    Prime Minister Narendra Modi made headlines in November 2016 when he announced the decision to demonetise 500- and 1,000-rupee notes. Debates are still raging about the move, especially about its impact on digital payments in the country.

    Recently, the Reserve Bank of India published data on digital payments. And since it’s been 8 months since the demonetisation move, it would be a lot better to notice trends in India’s cashless economy. Let’s have a look:

  • The rise in digital payments:

    Digital transactions surged over 23%, according to data presented to a Parliamentary Standing Committee on Finance. 2.73 crore transactions were conducted through digital means in May 2017, much higher than the 2.24 crore transactions conducted in November 2016.

  • UPI, bank transfers lead the shift:

    However, the trend is not uniform across the various modes of digital transaction. Around 30 million transactions were conducted every day through the Unified Payments Interface (UPI) in May 2017. Compare this to the 1 million-per-day transactions conducted in November 2016. Electronic bank transfers witnessed the second largest jump, with transactions jumping to 22 lakh in May 2017 from 12 lakh in November 2016. Use the use of cards, on the other hand, only increased by 7% over the same period. The RBI’s provisional data too suggests the same.

  • The demonetisation effect

    Many suggest that this significant rise in digital transactions is because of the demonetisation of 500- and 1,000-rupee notes. Currently, transactions amounting to Rs 70,000 crore have been conducted using cards at Point-Of-Sale (POS) terminals. This is an average growth of 25% since March 2016. “If demonetisation had not happened, then only by FY19 the credit + debit cards transactions on PoS terminals would have reached the current level of Rs 70,000 crore,” according to a report by the State Bank of India (SBI).

  • What do the detractors say?

    The volume of digital transactions hit a peak in December 2016. After that month, however, the number of transactions fell on a month-on-month basis. In fact, it fell until February 2017. Many suggest that this fall shows that demonetisation did not lead to the rise in digital transactions. However, it must be noted that transactions have risen over the last few months. This can hint at a more organic growth in digital transactions.

    • Monthly card payments hit record Rs70,000 crore on the back of note ban: SBI Read more

    • Shift to cashless economy: Demonetisation has indeed boosted digital payments but let’s not over-hype it Read more

  • 2,500 crore

    Next time you cross an Octroi or Toll station, you could see a truck or a commercial vehicle zip past without stopping, all thanks to the Digital Payment infrastructure. The sensors would scan a tag and deduct the toll money automatically from a bank account or e-wallet. You could also see many drivers pay using a digital wallet or card. In fact, in June alone, around 82 lakh transactions at Toll booths were digital, according to National Payments Corporation of India data. For the whole year, the number could be as high as 2,500 crore!