One year of demonetisation: Digital transactions gather pace but still a long way to go!
The demonetisation exercise of last year that rendered Rs 500 and Rs 1000 bank notes invalid came as a big boost for digital payments. Be it banks or insurance companies, these sectors experienced customers making a bigger shift to the digital mode of transaction in the past one year. Read On ..
According to data released by the Reserve Bank of India, retail electronic clearing volume increased 38% between October 2016 and August 2017. Among retail payments, mobile wallet transactions as well as internet banking transactions have gained huge popularity.
"The growth rate of the digital payments industry which was earlier in the range of 20-50% has accelerated post demonetisation to 40-70%." said Navin Surya, Chairman, Payments Council of India.
RBI data shows that mobile wallet transactions have more than doubled between October and August to Rs 7262 crore - a growth of 115%. Mobile banking transactions have gone up from Rs 1.14 lakh crore to Rs 1.80 lakh crore between October 2016 and June 2017. Mobile banking transactions have also received a boost with the introduction of UPI, BHIM, USSD . RBI has approved 326 banks to undertake mobile banking transactions.
Parthasarathi Mukherjee, MD & CEO, Lakshmi Vilas Bank said, "It is now a year after the event and, on reflection, I feel that the impact for the banks has been largely positive. Besides the fact that banks picked up deposits, during the demonetisation drive, a lot of small loans got paid off, many of which were sticky. A spinoff from demonetisation has been the overall increased emphasis on digital transactions and that channel has seen manifold growth."
EbixCash (formerly ItzCash) Chief Growth Officer, Mr. Bhavik Vasa says "Demonetisation has been a catalyst event, which created an inflection point in the eco-system, where the government, regulators, industry players are now driving towards a common vision. This is only Round 1 completed (first year post-demon) ... the cashless marathon has only just begun!""
EbixCash has more than 2,00,000 retail touch points across the country, and has clocked a growth of 35-40% across sectors.
"10 years ago, nearly 2% of all transactions were digital, today approximately 12% -15% of the transactions are done digitally and we are very optimistic that now the industry is all set to witness an accelerated growth during the next decade," Mr Vasa said. Ebix group CEO Robin Raina has further committed US$ 200 million fund for investments and growth in India.
Acording to EbixCash, the top categories to drive the momentum have been bill payments and travel bookings with more and more spends being made in these sectors. The company said corporate disbursements is also a critical segment as transactions in this segment is rapidly moving to prepaid cards and other forms of digital mode.
Mr Surya of Payments Council agrees that its going to be a long haul.
"However demonetization is just one of the milestones towards our country's cashless journey and not the final destination. It conveyed a strong psychological message to our countrymen that cash is not welcome and digitization of cash is inevitable. This also resulted in doubling of the number of PoS machines in just one year which was one of the weakest links prior to demonetization. However for further accelerating this growth momentum and moving towards a 'Less Cash Economy', both the government and the regulators need to continue the initiatives taken by them," he said.
Data shows that transactions in point of sale terminals have increased 61% in the last one year as number of such machines installed by merchants have grown close to 100% during the period.
Mr. Bhavin Turakhia, CEO & Co-founder at Zeta says demonetisation was a turning point for the Fin-Tech industry which witnessed a phenomenal growth. "We also felt a ripple effect with more corporates opening up to digital payments,"he said.
Apart from banks, the insurance sector has also benefited from the demonetisation exercise. While earlier, cash was one of the predominant modes of premium payment, insurance industry players said they have seen customers preferring digital payments now.
"Life insurance premiums are sourced in three ways: cash, cheque and online payment. Of course soon after demonetization the industry witnessed a sharp spike in cash payment of premiums but over time we have seen even households from Tier-2 cities that preferred cash getting comfortable with NEFT and ECS mandate. This huge behaviour change has significantly improved contactibility and will reduce unclaimed funds," said Mr. Karni Singh Arha, Chief Financial Officer, Aviva Life Insurance.
- TradeBriefs Bureau -
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