While ‘Digital India’ is being perceived by the whole nation as the government’s dream project, furthering the ‘Financial Inclusion’ agenda will play an instrumental role in accelerating the shift towards a less cash economy. With internet and mobile becoming the core elements of our lifestyle there is a high degree of disruption already happening in major areas of business and financial services will be one of the most vulnerable in the near future.
With the government implementing various measures within a year and others within the next two years, the Indian economy which is all set to actively discourage cash payments beyond a threshold is now fiercely moving towards building a robust less cash or digital ecosystem.
The recent notification issued by the government through a cabinet note to withdraw surcharge for online and card payment was highly lauded by the industry at large. This was then followed by a concept paper, which aids in improving country’s card based infrastructure.
Fundamentally the true competition for digital money within the consumer world is ‘cash’. Though cash comes with risk attached, possibility of getting misused and amply promotes unaccounted transactions, it has its own competitive advantages of being universally acceptable, fungible and is inclusive in itself. Hence for digital money to compete in a cash heavy society, it is extremely critical that there is parity brought between the two structures.
The usage of digital money needs to be endorsed through several measures. ‘Incentives to all’ would be a welcome approach to begin with, like an introduction of a rebate on expenses for transactions undertaken digitally, or a tax benefit to the end consumer amongst others. Doing away with the convenience fee charged for online utility bill payments would be another encouraging move towards going digital.
Payments companies are helping in the process of financial inclusion, but their business works on thin margins and longer gestation periods, hence they should be treated at par with other infrastructure development companies which require a relook into the tax issues of the segment.
Apart from promoting the usage of digital money, it is also important to disincentivize the usage of physical cash by altering the conventional usage pattern. This could be either done by levying a fee for physical cash transactions beyond a certain limit or imposing compliances for transacting digitally. If the source of cash is charged, there will be fewer propensities from consumers to use it and will be encouraged to use the more efficient system of e-payments.
The policies pertaining to the digital payments need to be unified at the macro level so that more and more things are aligned centrally such that a customer who undertakes a digital transaction is not restricted to any industry standardization. This in turn would not only help reduce duplication of efforts but also allocate a national recognition to the digital infrastructure thus attracting more takers to the digital model driving the digital India mandate.
Awareness operations for the digital infrastructure at a national scale, similar to the ‘Make in India’ or the ‘Swachh Bharat’ campaigns would mean to own the entire eco-system, thus promoting it as a key ‘national agenda’ and enabling its growth across categories, sectors and industries.
To further push for less cash India, it will be critical that digital payments instrument issuance be brought under the financial inclusion targets of the banks and also incentivize them to accelerate the financial inclusion in the country. This would usher in universal acceptance thereby encrypting the digital model seamlessly with in the eco-system which can then be viewed as a huge game-changer for the entire economy.
- By Naveen Surya – MD, ItzCash
