The shock and awe perpetrated upon an unsuspecting populace by demonetisation may not have achieved lofty aims of flushing out black money. However, it did have more people turning to digital payment methods. With over 80% of the country’s currency sucked out of the system, many had no option. And now the COVID 19 pandemic has more people choosing digital transactions. But has India really embraced digital payment? Are people comfortable with non-cash transactions?
Every disaster has some unintended, non-disastrous consequences. As a result of the pandemic and the need to limit cash changing hands, more and more people switched to digital payments. Greater internet penetration and smartphone use meant that digital payments were already on the rise over the past some years. With people restricted indoors and malls and markets shut, online shopping got a big boost; which further increased digital payments. In fact people went beyond credit cards – to genuinely contactless payment: more online transfers with internet banking, use of mobile wallets, pre-paid bank cards and to a very large extent, the use of UPI payment.
The need for people to remain socially distanced and to avoid shared surfaces has meant that even smaller traders have enabled the receipt of digital payments. According to Trends and Progress in Indian Banking for 2019-20, an RBI report, even those who had been hesitant to use digital payment have been forced to do so by the peculiar circumstances of the pandemic. More and more people are also paying their utility bills online
So, today, if I want the local grocery store to home deliver some eggs, bread and milk, I can ask to scan a code on the phone of the delivery person to make payment to the shopkeeper sitting in his store. It saves the shopkeeper the hassle of having to deal with a lot of cash at the end of the day. As a consumer, it saves me the hassle of needing to withdraw cash to pay for our daily needs. It helps that the RBI has been pushing digital transactions and made it easier for these services to operate in the country.
Well, yes and no. While the middle class with steady incomes and bank accounts and means have embraced digital payments in a big way, many Indians continue not to have to access. In India, where vast numbers live in poverty; many barely making enough for subsistence, cash is still king.
According to some experts, the absolute volume of cash will in fact increase over the next few years before plateauing and then declining. For a vast majority of Indians, cash is still the easiest to deal with. This is not only because of comparatively lower literacy levels but also a lingering sense of suspicion about digital payment methods.
Simply having a phone is not tantamount to being tech-savvy. Just because there is a phone in the hand doesn’t mean that that daily wager or the domestic help in our home knows how to receive or make digital payments or has the confidence to do so. The methods of redressal in case of a dispute remain tedious and difficult for people to access.
There are those who argue that the decline in ATM cash withdrawals points to increasing non-cash transactions, however, this may not be the case. In fact, this decline could merely point to a decline in overall economic activity. If there are fewer cash payments being made, it is because people simply don’t have the wherewithal to spend right now. So while a certain segment of society has taken to digital payment systems like ducks to water, these remain out of reach for a large proportion of people. Digital India still has a long way to go.
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