FY 2017-2018 witnessed an exceptional rise in the adoption rate of digital payments. This can be attributed to the government’s revolutionising move, demonetisation. As a digital economy also benefits the government, they have been pushing for greater volumes of digital payments. Recently, the government has announced that they are targeting an increase in the volume of digital transactions by 50 percent. The new target will be a total volume of 30 Bn transactions by the end of FY 2018-19. This bold announcement by the government will be one of the most defining payment trends of 2018. To accomplish this, the government has set different targets for the banks as well as digital wallet providers.
The target of 30Bn transactions for FY 2018-19
In FY 2017-18, the government set a target of 25 Bn transactions. Though a large number of people adopted digital payment methods, the target fell short by 18 percent as 20.3 Bn digital transactions were recorded by the end of the fiscal year. Despite falling short of its target made in the FY 2017-18, the government is hopeful to observe a rapid boom in the digital transactions. It declared the goal of reaching 30 Bn digital transactions by the end of this year. According to reports, the government has set a target of 23.7 Bn transactions for the banks while the wallet providers are expected to reach 6.3 Bn transactions. The targets are assigned based on the customer base, size, and reach of the organizations. The cash crunch witnessed over the past few months has strengthened government’s endeavors to promote digital transactions at large scale.
Following the move, the Ministry of Electronics and Information Technology of India has sent a letter to all the banks and digital payment providers. According to the letter, the banks with digital payment merchants are ordered to deploy 20 lakhs POS terminals (point-of-sale) to facilitate digital transactions.
Will this move lead to higher adoption of POS machines?
With customers demanding multiple payment options, the availability of POS terminals have become even more important for business owners. Previously, high MDR charges were one of the biggest concerns businesses had. MDR charges were required to be paid by the business owners every time a customer swiped their card. Steep MDR charges acted as an obstacle in the way of smaller businesses using POS terminals as it could seriously cut into their profits.
But in a move to support the push for higher volumes of digital transactions, the government announced a reduction in MDR charges. This along with the availability of affordable POS machines have encouraged businesses of all sizes to offer customers the option of cashless payments. It can help a number of businesses perform well on digital platforms. As small businesses form the backbone of India’s economy, this announcement could be an important factors in helping the government meet their target of 30 bn digital payments.
Government’s previous endeavors to encourage digital payments
The government of India has been encouraging digital payments for several years. It launched the BHIM app to offer a safe & quick payment interface, reduced the transaction fees on digital payments, announced lucky draws for digital payment users and came up with several other lucrative schemes for the same. All these efforts led to a constant rise in digital transactions.
In January 2018, a record high 1.11 Bn digital transactions were computed, which is 4.73 percent more than the 1.06 Bn transactions made in December 2017. As per RBI’s data, the total value of digital transactions reached 131.95 Tn ($2 Tn), which is the second highest value of digital transactions recorded in any month.
Present scenario of digital payments in India
Currently, the popular modes of digital payments are UPI, IMPS, NEFT, digital wallets, Aadhar enabled systems and POS terminals. Apart from BHIM, foreign players like Google Tez and WhatsApp Payments have forayed into the market and witnessed a high adoption rate. The e-wallet companies have totally revolutionised the digital payments sphere. They have simplified the way of sending and receiving payments by getting it done via few taps on the smartphones. As the security in digital payments have also improved significantly, users will be more confident about adopting these methods.
Going by current trends, digital transactions are almost certain to become more popular in the future. Thus, we are forging towards a better India and this target of 30 Bn transactions for this financial year seems achievable.