Demonetisation and after: Is the digital drive gaining currency?

Months after the note ban, this is how some are moving money in the economy



Gone are the days when the term ‘financial transaction’ made one think of bank counters and queues. Now, be it shopping or banking, what comes to mind — and hand — is the smartphone, duly armed with mobile apps of every kind.

Going digital was given a big push with the Centre’s demonetisation move in November last year. In an online survey conducted by BusinessLine, about 67 per cent (among 420 participants) increased their digital transaction, post demonetisation.

While demonetisation was aimed at countering black money and extending digitisation, adapting to a cashless economy has thrown up its own challenges. Eight months down the line, how is the digital drive doing? BusinessLine sounded out a cross-section of people for their take.

Mobile leads the way

According to RBI data, mobile banking transactions, which went up post demonetisation, continued to rise even after the cash crunch eased. These transactions, which averaged ₹1-1.1 lakh crore a month (in value terms) pre-demonetisation, touched ₹1.9 lakh crore in May 2017. However, despite the greater acceptance of mobile banking, users continue to grapple with connectivity issues. According to Swetha Mohan, who owns and runs a library (Little Love Library), “It is very convenient to use the cell phone, you carry it everywhere, you enjoy internet connection most of the time, so checking out movie tickets or your account balance is easy. But making payment is sometimes problematic when the internet connection is slow.”

Having a mobile handy is as good as cash stashed in your pockets, but extra safeguards are needed to ensure that sensitive information is not leaked, say some. Almost all the payments are linked with applications in the phone, be it hailing a cab or online purchase of that coveted dress.

Marketing professional Shyam says, “If I have to book a cab or purchase something online or compare rates online to offline, I do it with my phone. Although my phone is password-protected, I still have to ensure I keep my phone safe.”

According to the latest RBI data, transactions done through prepaid instruments have gone up from ₹1,321 crore (in value terms) in November 2016 to over ₹2,000 crore now.

Apart from mobile phones, desktop, laptop/tablet and plastic money are also widely preferred.

Asha, a 25-year-old student, prefers carrying a debit card. “I hardly take cash beyond ₹100. Almost all shops accept cards and the purchase limit to accept cards has come down to ₹100. So any purchase less than ₹100, I can pay by cash. It is simple and easy.”

Cashless economy

According to a report from FIS, 34 per cent of travel is booked through mobile payments while 37 per cent is through your credit or debit card.

Shyam says, “I use ola money, paytm to make payments while I’m travelling, it is better than carrying cash. But when I book long travel, I use my card. The same way, when I shop, I swipe my card rather than link my account for online shopping.”

While Gen-X and Gen-Y have embraced cashless to an extent, plastic money is yet to gain ground when it comes to the older people though they have become digitally savvy. C Ramamoorthy, 62-year-old retired marketing officer, says “I try my best to reduce the usage of cash. Even for maid and milkman, I credit their salary to their account. I have not opted to use paytm services or any such application because I don’t know how to use these.”

Natarajan, who is also 62, and a musician by training, states, “I’m not comfortable using card but I was left with little choice post demonetisation, when ATMs ran out of cash. While it is better to carry plastic than wads of cash any day, cash is still more convenient for me.”

RBI data suggests that from around ₹52,000 crore (in value terms) in December 2016, usage of debit and credit cards at point-of-sale (POS) terminals has fallen to about ₹45,000 crore in May 2017 (about ₹35,000 crore in June so far). With cash withdrawals at ATMs easing up since February, it would appear that many people who were forced to use plastic, post demonetisation, have moved back to cash.

The small business units, who are usually dependent on cash on a regular basis, have taken to the cashless system.

Anil Kumar, owner of Anil Auto Parts, says “I deal with auto drivers who usually make their purchases only in cash. But post demonetisation, nearly 15 per cent of my business is through debit and credit card transactions.”

Similarly, Swetha Mohan’s Little Love Library has moved to a digital platform. Swetha says, “I don’t have a card machine since most of the lending charges are less than ₹100 unless readers take 20-30 books.

But post demonetisation, I have asked for the membership amount to be transferred to the library’s bank account. That way. I don’t lose a customer.”

Hiccups to digital system

Digital transactions, while convenient, come with their own set of issues, such as security and operational flaws.

Digital transactions are prone to cyber attacks and you need to ensure safety from your side. According to Natarajan “I get spam messages and even mails from banks, offering the ‘lottery amount I won’.”

A digital system also has operational difficulties such as connecting with servers. Bhavani, a 42-year-old professional, laments, “It is very frustrating when I swipe my card and still wait for another 10-15 minutes as the machine takes time to connect with the bank. I could have easily paid cash.”

Natarajan also has faced issues during online transactions. “Sometimes the webpage displays a message requesting me to wait before my transaction is declined. By then I get a message on my mobile phone that the amount has been debited and I wonder what has happened.”

Given the rise in digital payments, the RBI recently widened the scope of the Banking Ombudsman Scheme 2006, for addressing customer grievances around mobile banking.

A customer can lodge a complaint against a bank for non-adherence to RBI instructions with regard to mobile banking/electronic banking services in India.

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