If we go by the recent reports, the digital payments adoption in India is on a constant rise. However, the government does not seem satisfied with the progress. The cash crunch issue which caused uproar earlier this month, due to the lack of cash in ATMs at various places across India, has further aggravated the government’s concerns over the adoption of digital payments at large scale.
As per an ET report, the government is now eyeing a 50% increase in the volume of digital transactions, leading to around 30 Bn digital payments by the end of FY 2018-19. In order to achieve this, separate targets have been set for banks and digital wallets.
While banks are required to reach a volume of 23.7 Bn transactions, the digital wallets are required to fill in the rest.
The individual targets given are based on the reach, size and customer base of the institution. “The ambitious target has been set even though the country has fallen short of last year’s target by 18%, having clocked 20.3 Bn transactions only,” said a few people close to the development to ET. The target for fiscal 2017-18 was 25 Bn transactions.
A letter has also been sent to banks and digital payments companies by the Ministry of Electronics and Information Technology, which states that “banks that acquire merchants for digital payments have been given a target to deploy a total of 20 lakh point-of-sale (terminals).”
At present, the basic modes of digital payments in India are UPI, Aadhaar enabled payment system, IMPS, digital wallets and POS terminals. The Government owned BHIM app and the entry of foreign giants like WhatsApp, Google Tez, Amazon Pay on the UPI board, are further pulling in the digital payments rope in the country along with the homegrown players like Paytm.
To be noted, Paytm recently claimed to have contributed 68 Mn UPI transactions in February 2018.
Overall, the digital payments in the country reached a record high of 1.11 Bn in January 2018, up by 4.73% from the 1.06 Bn mark touched in December last year. According to data released recently by the Reserve Bank of India (RBI), the total digital transaction value surged to $2 Tn (INR 131.95 Tn) in January, making it the second highest reported in a single month over the last one year.
The number above might show a positive picture but with stricter KYC norms, this data is now falling sharply. Notably, the completion of the KYC involves linking of Aadhaar card and PAN card to the e-wallet mobile applications.
As per industry estimates, the fall, in terms of the number of digital wallet users, has been somewhere around 80% to 90% and is largely the result of most customers shying away from full KYC authentication.
Also, with elections around the corner, the cash is expected to spike again in the system, resulting into the fall in digital payments at many corners of the country.