DeMo momentum not yet lost, ensure ease of use
A look at the bare numbers the central bank puts out every week on digital payments suggests that, since cash is coming back into the system, the post-demonetisation boost to digital payments is waning. Digital payments, on the whole, the representative data shows, rose from Rs 94 lakh crore in November 2016 to Rs 104 lakh crore in December, and then fell steadily to Rs 93 lakh crore last month. Once you adjust for the number of days in each month, however, the change is less dramatic, indeed the volumes rose last month—from Rs 313,300 per day in November, digital transactions rose to Rs 335,600 crore in December, fell to Rs 298,700 crore in January 2017 and then rose to Rs 330,700 crore last month. Even more interesting is what is happening on the individual components. At Rs 70 crore a day, UPI transactions have crossed mobile wallets—given how new UPI is, the success indicates how easy it is to use; and unlike wallets, the money goes directly to your bank account. There has been a discernible fall in the use of debit/credit cards—these rose from Rs 1,200 crore a day in November to Rs 1,700 crore in December but fell to Rs 1,400 crore in February—one possibility is the reintroduction of merchant fees has become a deterrent. IMPS has gone from strength to strength, from Rs 1,100 crore per day in November to Rs 1,400 crore in December, Rs 1,600 in January and Rs 1,700 crore in February.
In other words, the ease of use of digital payments appears to have hooked on a certain segment of the population. A recent survey by consultancy firm MicroSave in Rajasthan, Madhya Pradesh, Uttar Pradesh and West Bengal reinforces this view. It found that two-thirds of those opting for non-cash payments during demonetisation will continue with them if it is easy to do so; the rest will go back to using cash for a variety of reasons. That is why, the government needs to focus on both ease of use and educating people in making digital payments, and promoting digital payment methods, like UPI, in as many local languages as possible. The fact that BharatQR has started will make payments easier even in establishments that don’t have PoS machines for swiping debit/credit cards, and AadharPay, which has just been rolled out, makes payments simple for those that don’t even have mobile phones. The issue of merchant discount rates, needless to say, needs to be resolved at the earliest and, as this newspaper has argued before, since the government stands to benefit from formalisation of payment systems, it should look at bearing the costs of digital payment methods, at least up to a certain level of transaction.