We had analyzed the Feb-17 electronic payment data from RBI and shared a report which opined ‘dream of tectonic shift of India to a cashless society looks less convincing’. We repeated the analysis based on Mar-17 data and we believe there is a need to recalibrate our thoughts.
Overall we believe that the digital payment is stabilizing to a higher baseline and there is increase in the confidence of customer on such digital modes. This is primarily reflected in the higher average transaction value across most of the key digital transaction modes.
From an overall perspective, though the transaction value can get heavily skewed by RTGS, but the fact that volume has also been on the upside/ stabilizing shows that digital transactions is getting more common. This is illustrated in the below chart. Pls. note that the numbers for every month had been rationalized to ’30 day period’ to allow comparison across months.
(All volumes are in Millions, Value in INR Billions: as per the RBI reporting norms)
Now let us focus on a few key digital payment platforms which the GOI has been pushing & where we are seeing multiple payment players fighting it out.
It started a few months back and hence the growth in %age looks very high due to low base effect. But overall both value & volume has increased consistently across all the months.
The only dip we see in Mar-17, is a drop in the ‘average transaction value’. This may be the result of more consumers opting for UPI even for low value transactions. The onset of BHIM and other banks UPI platform may have contributed to this growth and as well as popularity.
While volume of transactions seems to stabilize around 64-65 million per month, the value of transactions has been following a consistently upward curve (from 324 Billion INR in Nov-16 to 546 Billion INR in Mar-17) . This obviously has a cascading effect on the ‘average value per transaction’ which has been steadily rising. The good part is that right from Jan-17, it has been increasing consistently. This would again imply a greater consumer confidence in using it despite cash being available.
With Mobile becoming an universal mode of payment for many, it is no brainer that it repeats our earlier stories.
POS Card Transactions (Debit & Credit Cards)
Here we are seeing an all round dip. While total value & volume had been decreasing from last few months, quite surprisingly even the ‘average transaction value’ has also declined sharply in March-17. This probably implies that consumers are using more of mobile based payment modes for such payments. Another plausible reason, can be that with more cash being available, more consumers are using cash for shopping. It is probably mix of both but certainly ‘return of cash’ is having some negative impact on digital payments here.
PPI / Pre paid instrument
PPI is also showing a stabilizing trend. This is mostly because of other modes of digital payments e.g. UPI etc gaining more popularity for ease of transactions. Just to clarify, PPI transaction value remained around 20 Billion for last few months, UPI increased from negligible numbers in Nov-16 to more than 23 Billion INR by Mar-17.
We will end with a review of USSD platform. With smart phone becoming ubiquitous, we naturally expect this platform to have diminishing impact. The value & volume is less and is decreasing also month on month. This will remain in vogue still for some more time as lot of rural population continues to be on feature phones. This will mostly include small payments through banking correspondent. Also rural India is much more cash intensive and hence we can expect more reversal in usage of digital channels in rural India, with more cash getting available.
To summarize, we can fairly say, that consumers confidence on the digital payment platforms seems to have reach a crescendo. Not only we are seeing a higher baseline being reached but also decent rise in usage month on month on the more new digital modes. With likes of WhatsApp planning to enter the digital payments market as well as more of the payment bank licensees coming alive, we can expect the upsurge to continue in coming months.
We though will keep a watch on the volume of transactions. We believe that the demonetization and the follow on advertorial & other push on digital, has been able to move a certain section of the population towards digital. These set is also realizing its benefit/ ease and perhaps transacting more. Further drastic increase in adoption may remain a challenge for near term and that is where the GOI constant push and the proactive roles of the different payment players will continue to play a significant role.
RBI Electronic Payments System Representative Data (Nov-16 to Mar-17); accessed last on 6th April 2017