This will be a million dollar question/ apprehension that not only GOI but many analysts will be having! While GOI believes that Demonetization & Digital India working together will push India towards more cashless (aka electronic) society, there is a question lurking in everyone mind whether the return of cash will spoil the ‘digital party’! Old habits die hard!!!
We don’t have an answer yet, but an analysis of the electronic payment data (representative) from RBI does not do much to do adieu that apprehension. Instead a closer look will tend to make us believe that our fear is not totally unfounded.
For the analysis, we took the RBI data (Payment Systems – Representative Data: till Feb 28th). To ensure an ‘apple to apple’ comparison, we rounded the data for 30 days. For e.g. Feb has 28 days, so we divided Feb data by 28 and multiplied by 30, while for Dec 16 & Jan 17, we divided by 31 and multiplied by 30. This ensures right reflection especially for the non clearing house related electronic payments (which does not get impacted by banking holidays e.g. POS, IMPS, Mobile, UPI, USSD & PPI). We have excluded RTGS transactions for our analysis as these are very high value, low volume and skew the analysis completely.
All volumes are in Millions and values in INR Billions
Electronic Transactions through clearing house
Here we see a familiar, encouraging trend for electronic transactions. The value for NEFT & NACH shows an upward trend though volume wise it is leveling off. CTS show a downward trend in volume while value wise it is leveling off. Here let us take a note that NACH is primarily for bulk transactions leveraged by banks, financial institutions, GOI etc.
Retail centric Digital payment platforms
This is where it starts to get interesting!
- Mobile banking drops both by value & volume
- PPI also shows leveling or may be a slight drop
- Interestingly both Mobile banking & PPI shows a slight downward trend from Dec-16 figures which can be connected to the improved cash scenario from mid Jan-17 onwards
- The drop in POS value & volume is more significant. It has been decreasing steadily from Dec-16 figures. This may be due to two possible reasons. First, because of cash constraints and the need to re-monetize or reversely more availability of cash leading to lesser transaction through cards! The second one looks more plausible as Dec-16 figures were much more than Nov-16 figures, where demonetization forced people to alternate channels
- A more positive trend is seen with UPI & USSD. But USSD shows a lower volume in Feb-17 though with a slightly higher value. UPI shows increase in both. This may have deeper reasons. USSD is more used in rural context (probably) and higher availability of cash in rural may be making them to switch to their informal cash intensive days. The UPI increase may be connected to the PPI leveling as more people would prefer UPI compared to PPI (which includes mobile wallets transactions). This will then buttress the fact that the UPI is going to make mobile number driven payments/ wallets slowly redundant because of ease.
- Mobile banking also shows perceptible drop in both value & volume. Its figures are having this downward trend from the Dec-16 base again (at least in value!)
It is still early days to make a definite conclusion but the analysis gives a feeling that we are at a risk of getting back to our early days of cash! Demonetization, Digital initiatives by the GOI are making lots of noises but the dream of tectonic shift of India to a cashless society looks less convincing.
As we have highlighted in some of our other articles, there are issues that the country is facing (e.g. basic health care etc) which needs more attention and may have much stronger impact on long term on the development of our economy & improving life of ordinary mortals. At same time, beyond the crash course of demonetization, more effective measures need to be taken to minimize bribery, corruption etc. That will ensure a more wholesome development for the country.
Featured image made from Microsoft clipart