Paperless Financial Transactions – An Opportunity That Is Largely Ignored By The Startup Community

According to reports, paperless transactions during the past financial year amounted to INR 92 lakh crore as against paper-based transactions worth INR 85 lakh crore. For a country like India, struggling with issues such as financial inclusion, black money and lack of infrastructure (internet connectivity in rural areas), this news is a welcome surprise and demands to be celebrated. But it went largely unnoticed.

Growth in paperless transaction is in line with the government’s and the RBI’s agenda of creating a cashless society, with monetary transactions through the internet, ATM, cards and mobile devices.

Why is increase in paperless transactions cause for celebration? 

Moving from paper-based to paperless transactions can have a transformative effect on the country:

1. Black money can be curbed, as money in the system can be easily tracked and accounted for through the online payment methods
2. Cost per transaction can be reduced
3. Circulation of fake currency can be monitored and controlled.
4. Comfort with online modes of payment can aid the growth of the e-commerce industry which, as of now, is trying its best to discourage the CoD payment option.
5. Increase in preference of cashless payment systems can also aid RBI’s financial inclusion goal

Along with improving the economy, preference for paperless financial transactions can also give a boost to the electronics and IT industry by providing ample opportunities to introduce new devices for both the consumers and the merchants. Entrepreneurs can innovate and create new platforms for processing transactions e.g. with the increase in preference for online payments, usage of smart phones will further increase, and facilities like mobile wallets will become more popular.

On their part, the government and the RBI have, in the last few years, implemented measures like – Rupay cards, direct-benefit transfer schemes, 2-step verification process for online transactions, debit card MDR (merchant discount rate), and wallet service licenses, etc –  to promote cashless transactions.

But the startup community has seen very little action on this front

Given these measures, one would have expected the online payments industry to see the most innovative products being launched. However, significant and meaningful efforts in this direction are yet to be seen. The entrepreneur community has not shown the expected enthusiasm or innovation to take advantage of the still evolving industry.

At present the online payment market is majorly dominated by a few known players (ICICI, Airtel, etc) and a little more than a handful of startups (MobiKwik, Zaakpay, Citrus, etc) who are all offering online payments through mobile wallets.

There is still a large population that is not only sceptical of the safety accorded by online transactions system, but is also not comfortable in operating the seemingly easy payment platforms. It is this untapped market for which new, innovative and simpler products were expected to be offered by the startup community.

What’s holding the entrepreneurs from tapping into this opportunity? 

Given the nature of the industry, we have not seen enough entrepreneurs targetting this space. Entrepreneurs need the support from authorities like the RBI and financial regulators, to enter the market and experiment with technologies and product prototypes – to disrupt and shake up the market.

In addition to the support already being provided, entrepreneurs can benefit from the know-how regarding various financial rules and regulations, assistance in implementing KYC norms, especially in the B2C segment, in order to remove safety concerns of both the parties, and more efforts extended towards developing the rural infrastructure. Apart from educating the entrepreneurs, it is essential that relevant steps are taken by the government to educate the end users of the benefits of this service and impart basic financial know-how to them as well.

There is no arguing against the fact that if the vision of a cashless India is to be achieved, more efforts in all these areas need to be put to develop both the supply and demand side of the industry.

But, to start with, government efforts to foster innovation in this sector will definitely encourage the start up community to come up with new technologies and processes that will further expand the reach of paperless transactions.

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