India Maybe Finally Shaking Off Its Cash Habit, RBI Data Shows

Latest data on RuPay usage along with upward trends in usage of debit cards and Point of sale (PoS) transactions shows that after consumer habits are finally going through a real transformation in India.

An assessment of the multiple avenues of digital payments show that user interest has seen a small but significant shift towards cashless transactions.

After the demonetisation in 2016, the sudden attention to digital payments was short lived however, the performance indicators by the Reserve Bank of India show that in FY18-19, digital payments are on an upward growth trajectory.

The yearly RBI bulletin of Payment system indicators shows that the use of prepaid payment instruments (PPI) increased 33% from 3.45 Bn transactions in 2017-18 to 4.6 Bn transactions in 2018-19. In terms of value, PPIs grew 50% reaching INR 2128.76 Bn from INR 1416.34 Bn in the last year.

It is interesting to note that in October 2018, RBI approved the interoperability of prepaid payment instruments issuing norms for the same. It clarified that the norms are facultative in nature and only participating PPIs issuers will be required to follow them.

Further narrowing it down to mobile wallets, the growth was almost 36% reaching 4.13 Bn transactions from 3 Bn transactions in the previous year. In value terms, mobile wallets saw 69% growth reaching INR 1836.55 Bn from INR 1086.75 Bn in 2017-18.

The Return Of Cash Due To KYC Norms

Since October 2017, according to industry estimates, digital wallet users dropped by a whopping 80% to 90%, largely as a result of users shying away from full KYC authentication. The difference can be noted by the fact that in January 2018, mobile wallets recorded 1.11 Bn transactions worth INR 135.1 Tn.

Many fintech firms had been of the opinion that there has been a sizeable dip in the value of cash loaded into e-wallets by users since KYC was made mandatory. But the yearly growth has a better story to tell now.

One of the most active improvements could be seen in mobile banking as transactions reached 6.2Bn from 1.87 Bn in the year before, a 231% increase. The growth continued to be marginal in terms of value as well, as it improved 100% reaching INR 29,584.07 Bn in 2018-19.

Another interesting revelation was the growth of debit cards on POS. A 32% increase in the volume of transactions via debit cards on POS reaching 4.4 Bn from 3.3 Bn in 2017-18. The value of transactions increase was nearly 29% reaching INR 5934.75 Bn in 2018-19.

A media report said that RuPay reported 1 Bn transactions through both online and offline merchant payment modes in financial year 2019, a nearly 70% jump compared to 667Mn transactions in financial year 2018.

The use of credit card also saw good growth of 25% reaching 1.7 Bn transactions from 1.4 Bn transactions in 2017-18. The improvement was also good in terms of value reaching INR 6033.48 Bn from INR 4589.65 Bn in 2017-18.

RBI in its Payment and Settlement Systems in India: Vision 2019–2021 emphasised on innovation, cyber security, financial inclusion, customer protection and competition. It expected 50% increase in mobile based payment transactions. Digital payment transaction turnover vis-à-vis GDP (at market prices-current price) is expected to increase to 10.37 in 2019, 12.29 in 2020 and 14.80 in 2021.