Cashless Transactions Get A Huge Boost; Govt Approves No Service Charge On Digital Payments

Cashless Transactions Get A Huge Boost; Govt Approves No Service Charge On Digital Payments

The Union Cabinet has announced the withdrawal of surcharge, service charge and convenience fee on digital payments done through cards or ewallets. Also, beyond a threshold, one has to make payment online or through cards.

The move is made in a bid to motivate people to switch to electronic payments, and avoid cash transactions.

The Cabinet outlined several short (to be implemented within a year) and medium (to be implemented in two years) targets, to be attained by various ministries, towards pushing more electronic payments in the country.

The move comes as a great boost to cashless transactions, and commemorates the Digital India mission.

Talking about the development, Govind Rajan, COO FreeCharge, said, “India is amongst the most cash intensive cash economies in the world. India’s cash to GDP ratio is 12%, which is 3-4 times that of comparable economies like Brazil and South Africa. The cost of managing this high cash dependence is over INR 20,000 Cr in the formal banking system and much more in the entire economy. With this strong signal, we are on our way to wean the country off its expensive and inefficient addiction to cash.”

The new move will provide consumers and merchants a secure and frictionless way of transacting.

[contextly_auto_sidebar]

Other features of the report include

  • Rationalisation of Merchant Discount Rate (MDR) on card transactions
  • A differentiated MDR framework for some key segments
  • Introduction of formula-linked acceptance infrastructure by the stakeholders of certain card products
  • Rationalisation of telecom service charges for digital financial transactions and promotion of mobile banking
  • Creation of necessary assurance mechanisms for quick resolution of fraudulent transactions and reviewing the payments ecosystem in the country have also been approved

Bipin Preet Singh, CEO and founder MobiKwik, opines that banking facilities and mobile payments are still out of reach for over  200 Mn Indians. Government’s decision of doing away with service charges for digital payments is a welcome step towards connected and cash-free economy.

The move will further increase adoption of mobile wallets by encouraging retailers to adopt digital payments without being concerned about paying any extra charges on cashless payments.

He further said, “The measures announced today supplement MobiKwik’s vision to power $5 Bn in payments, between 150 Mn users and 500K retailers, in the next 2-3 years. Much of this growth will come from tier-2 cities as well rural areas.”

These announcements will also allow mobile payment companies to function more like established financial institutions who can offer banking services via smartphones without the need to establish a physical outlet of a bank.

Nitin Misra, Vice President – Products, Paytm, believes that such a reform will push more number of merchants and consumers to adopt cashless payment alternatives. This will nudge the 95% of India, which still deals in cash, towards digital transactions.

He further said, “As the largest wallet player we resolved this problem much earlier for our sellers and customers and eliminated the surcharge from our system. Many new merchants have adopted the digital mode since we initiated the 0% TDR policy at Paytm.”


Welcome to Flash Feed, your essential source for breaking news and innovation from around the web – bite-sized and updated all day.


Author

Aparna Mishra

Inc42 Staff
After a 2-year-stint at Ernst & Young, Aparna moved to Journalism. Her prior experience enables her to understand business management. An avid reader and a traveller she hopes to gain insights on the startup ecosystem at Inc42.
Responses
https://inc42.com/flash-feed/skill-development-company-edubridge-raises-2-5-mn-from-insistor-acumen-fund/

Upcoming Events