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demonetisation: Cash still king as digital payments inch up slowly

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CHENNAI: If demonetisation was a push for a cashless economy, it has been working very slowly. Reserve Bank of India data shows the usage of wallets, non-UPI banking apps and Aadhaar-enabled payments has been slow to catch on, while that of debit cards has fallen. The UPI payments have been growing, and a significant chunk of them are mobile-based.

Overall, electronic payments stood at Rs 200 trillion in August — an increase of 5 per cent over August 2016 but 0.7 per cent lower than at the peak of demonetisation in December last year (Rs 201 trillion).

Some categories of digital payments have in fact fallen below their pre-demonetisation levels. Mobile banking saw the sharpest fall of 30 per cent since August last year, and 46 per cent since the demonetisation-period high of Rs 1.5 trillion. Debit card payments also fell by 2.2 per cent to Rs 2,706 billion this August from Rs 2,767 billion in October 2016. This was despite a 4 per cent increase in the number of debit card transactions. People are swiping their cards more often for smaller amounts at ATMs as roughly 10 per cent less cash is in circulation compared with the pre-demonetisation period.

The most touted benefit of demonetisation was the increase in mobile banking and wallets. But as of August 2017, mobile banking forms only 0.33 per cent (Rs 799.13 billion) of total online payments. Mobile wallets, including Paytm, Mobikwik and those from banks, form only 0.051 per cent (Rs 102.88 billion) of the total. Their share of the digital pie is virtually unchanged since August 2016. Mobile banking rose from 0.37 per cent of e-payments in August to 0.71 per cent in November 2016 before falling back to 0.33 per cent.

Different institutional payments, such as RTGS, clearing houses, settlements, cheques, etc, grew at 5-15 per cent year-on-year this August, half of the 30 per cent growth recorded in August 2016. RTGS transactions, of a high value and mostly done by business houses, increased 15.5 per cent year-on-year and 11 per cent since demonetisation.

Transactions on CCIL operated systems — including those of government securities, foreign exchange and money markets — fell by 7 per cent year-on-year this August, and by 10 per cent since November 2016. However, transactions on National Automated Clearing House (NACH) — used by corporates and financial institutions to pay salaries, pensions and dividends — increased 20 per cent.

Among retail payments, newer systems like mobile banking and e-wallets lagged traditional platforms like NEFT. While Bharat QR code and UPI transactions grew more than 100 per cent on a smaller base, they haven’t dented NEFT’s share of 90 per cent of the retail space these last two years. NEFT volumes increased 43 per cent this August to Rs 12.5 trillion from Rs 8.7 trillion last year.

“Earlier, the digital payment space was wallet-led; now there has been a paradigm shift towards banking apps,” said Deepak M Sharma, chief digital officer, Kotak Mahindra Bank.

Although the value of transactions on mobile wallets nearly doubled to Rs 102.88 billion, banks have unseated standalone wallets in this space. An independent report released by RBI shows that transactions on eight e-wallets — including Paytm, FreeCharge, Citrus Pay and MobiKwik—went down to Rs 19 billion in February 2017 from Rs 21 billion in January, and they had only 18 per cent of the total wallet space.

Wallet companies have since become more guarded about their transaction figures. Renu Satti, MD & CEO, Paytm Payments Bank, told TOI, “Paytm’s user base has increased from 150 million last November to over 270 million today. There has been a 3.5x surge in transactions this October as compared to last year.”

Upasana Taku, cofounder, Mobikwik, also gave only the number of customers but not transaction volumes. “The company has over 65 million app users, and the number has more than doubled from 30 million pre-demonetisation. Our average daily transactions grew from 1.5 million pre-demonetisation to 3 million post-demonetisation.”

Updated: November 8, 2017 — 2:32 am

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