Cashless / Digital Transaction

[tweaker]

With limited cash in hand and an indefinite crunch in sight, most people are rushing to cashless transactions.

 

"Digital transactions  bring in better transparency, scalability and accountability. The new move will compel more merchants to accept digital money.

 

The RBI classifies every mode of cashless fund transfer or transaction using cards or mobile phones as 'prepaid payment instrument'. These can be issued as smart cards, magnetic stripe cards, Net accounts, Net wallets, mobile accounts, mobile wallets or paper vouchers.  

 

CASHLESS MODES 

 

Mobile wallet: This is basically a virtual wallet available on your mobile phone. You can store cash on the mobile to make online or offline payments. Various service providers offer these wallets via mobile apps, which you need to download on the phone. You can transfer the money into these wallets online using credit/debit card or Net banking. This means that every time you pay a bill or buy online via the wallet, you won't have to furnish your card details. You can use these to pay fees, bills and make online purchases. 

 

Plastic money: This includes credit, debit and prepaid cards. The latter can be issued by banks or non-banks and can be physical or virtual. These can be bought and recharged online via Net banking and can be used to make online or point-of-sale purchases, even given as gift cards. 

 

Net banking: This does not involve any wallet and is simply a method of online transfer of funds from your bank account to another bank account, credit card, or a third party. You can do it through a computer or mobile phone. Log in to your bank account on the Net and transfer money via national electronic funds transfer (NEFT), real-time gross settlement (RTGS) or immediate payment service (IMPS), all of which come at a nominal cost ranging from Rs 5-55.

[tweaker]

In a move to promote digital payments, the government of India has announced a slew of measures.

 

NITI Aayog CEO Amitab Kant announced a #LuckyGrahakYojna, under which digital payments through RuRay cards, UPI, AEPS and USSD between Rs 50 and Rs 3,000 will be eligible for awards.

 

There will be a different prize for consumers and merchants. 

 

Under the Lucky Grahak Yojna, 15,000 winners will be eligible daily for a prize worth Rs 1,000 each for the next 100 days starting December 25. A weekly award for around 7,000 consumers eligible for a maximum prize of Rs 1 lakh was also announced.

 

Under the Digi-Dhan Vyaapari Yojna, every week, more than 7,000 merchants will be eligible for Rs 50,000 prize.  

 

Mega awards, in both the categories will be declared on the occasion on the birth anniversary of Dr Bhimrao Ambedkar. Under this mega award, consumers can win prize worth Rs 1 crore, Rs 50 lakh and Rs 25 lakh, while merchants can win prize worth Rs 50 lakh, Rs 25 lakh, and Rs 5 lakh.

 

"Lucky Grahak Yojana and Digi Dhan Vyapari Yojana is Christmas gifts for the nation", said Amitab Kant.  Estimated cost for this scheme is expected to be Rs 340 crore. "Our focus is on poor, middle class and merchants, whom we want to start using digital payments",  Kant added. The prize scheme won't include payments made between or for availing government services. 
 
Transactions through e-wallets rise by 271 %  and that through UPI rise by 119 % post demonetisation. In India only 5 % of personal consumption expenditure is through digital systems.

[tweaker]

Domestic mobile wallet platform MobiKwik and the National Association of Street Vendors of India (NASVI) on Thursday teamed up to empower over 30 lakh street vendors from 25 states to use digital transactions.

 

"We will train 10 lakh street vendors in three months to enable them to transact digitally. MobiKwik payments will soon be accepted by 30 lakh street vendors in 25 states directly," said Upasana Taku, Co-founder of MobiKwik, in a statement.

[tweaker]

As the country moves towards a cashless  environment after demonetisation, the initial awe and confusion have given way to a flurry of concerns. Will the emphasis on online transactions provide convenience and tangible benefits or just add to stress and additional charges? 

 

To incentivise the move towards a cashless economy, the government has come up with a rash of discounts and freebies on digital transactions. But will these be substantial enough and, along with other benefits, counter the higher risk of identity theft once the currency notes are back in circulation? What are the gains and drawbacks of financial digitisation? Here’s a look at what may be in store for you. 

 

ADVANTAGES OF GOING CASHLESS 

 

Convenience 

The ease of conducting financial transactions is probably the biggest motivator to go digital. You will no longer need to carry wads of cash, plastic cards, or even queue up for ATM withdrawals. It’s also a safer and easier spending option when you are travelling. “The benefits are enormous if you leave out the low-income group, which will face a huge challenge,” says Kartik Jhaveri, Director, Transcend Consulting. “For the rest of the country, it is constructive and simple. 

 

It will be especially useful in case of emergencies, say, in hospitals,” he says. Adds Jayant Pai, Head, Marketing, PPFAS Mutual Fund: “You have the freedom to transact whenever and wherever you want. You don’t have to be physically present to conduct a transaction or be forced to do so only during office hours.” 

 

Discounts 

The recent waiver of service tax on card transactions up to Rs 2,000 is one of the incentives provided by the government to promote digital transactions. This has been followed by a series of cuts and freebies. It’s a good time to increase your savings if you take advantage of these. For instance, 0.75% discount on digital purchase of fuel means that the petrol price in Delhi at Rs 63.47 per litre can be brought down to Rs 62.99/l with digital payment. 

 

Similarly, saving on rail tickets, highway toll, or purchase of insurance can help cut your costs. Add to these the cashback offers and discounts offered by mobile wallets like Paytm, as well as the reward points and loyalty benefits on existing credit and store cards, and it could help improve your cash flow marginally. 

 

Tracking spends 

“If all transactions are on record, it will be very easy for people to keep track of their spending. It will also help while filing income tax returns and, in case of a scrutiny, people will find it easy to explain their spends,” says Manoj Nagpal, CEO, Outlook Asia Capital. “Besides the tax, it will have a good impact on budgeting,” says Pai. 

 

Budget discipline 

The written record will help you keep tabs on your spending and this will result in better budgeting. “Various apps and tools will help people analyse their spending patterns and throw up good insights over a couple of years,” says Jhaveri. Controlled spending could also result in higher investing. If the same amount of cash does not flow back into circulation and people continue to use mobile wallets and cards, it is also likely to bring down the latte factor. This means that the Rs 10 you spent on candy or chips, or that regular cup of coffee office is likely to take a hit since you will be short of loose change and smaller currency notes. There’s a lesser chance of budgetary leaks and unaccounted for spends sneaking into your budget at the end of the month. 

 

Lower risk 

If stolen, it is easy to block a credit card or mobile wallet remotely, but it’s impossible to get your cash back. “In that sense, the digital option offers limited security,” says Pai. This is especially true while travelling, especially abroad, where loss of cash can cause great inconvenience. Besides, if the futuristic cards evolve to use biometric ID (finger prints, eye scan, etc), it can be extremely difficult to copy, making it a very safe option. 

 

Small gains 

It may not seem like much of an advantage, but being cashless makes it easy to ward off borrowers. Another plus is that you can pay the exact amount without worrying about not having change or getting it back from shopkeepers. 

 

GO DIGITAL, GET DISCOUNTS 

 

Service tax : Waiver of service tax of 15% on digital transactions up to `2,000. 

 

Fuel : 0.75% discount on digital purchase of fuel through credit/debit cards, e-wallets or mobile wallets. 

 

Rail tickets : 0.5% discount on monthly and seasonal suburban railway tickets from 1 January 2017. Online rail ticket buyers get up to `10 lakh free accident insurance too. 

 

Rail catering : 5% discount on digital payments for railway catering, accommodation, retiring rooms, etc. 

 

Highway toll : 10% discount on NH toll payment via RFID or fast-tags in 2016-17. 

 

Insurance : 10% discount by government general insurers on premium paid online via their portals. 8% discount on new LIC policies bought online via its site. POS: Rs 100 a month is the maximum rent that PSU banks can charge for PoS terminals. 

 

Rupay : Kisan credit card holders to get RuPay Kisan cards. 

 

DRAWBACKS OF DIGITAL TRANSACTIONS 

 

Higher risk of identity theft 

“The biggest fear is the risk of identity theft. Since we are culturally not attuned to digital transactions, even well-educated people run the risk of falling into phishing traps,” says Nagpal. With the rising incidence of online fraud, the risk of hacking will only grow as more people hop on to the digital platform. 

Besides, the latest move by the government to remove the two-factor authentication process for online transactions up to `2,000, will not help. Irrespective of the size of transaction, the absence of this additional layer of security will expose thousands to the risk of identity theft. Another weak link is the inadequate redressal mechanism. “With the poor redressal system in India, imagine what a poor rickshaw puller will do if he has his Aadhaar ID stolen?” asks Mumbaibased financial trainer P.V. Subramanyam. 

 

“Given the tedious process and poor grievance redressal, people will have no easy recourse if they lose money online,” adds Nagpal. There is no stringent legal process to deal with this kind or scale of fraud. Add to it the mass identity theft from banks’ or companies’ databases and it can turn into a financial nightmare akin to the data breach in the Indian banking system in October this year. 

 

Losing phone 

Since you will be dependent on your phone for all your transactions on the move, losing it can prove to be a double whammy. It can not only make you susceptible to identity theft, but you could also be rendered helpless in the absence of physical cash or any other payment option. This can be especially problematic if you are travelling abroad or in smaller towns or villages with lack of banking infrastructure or other payment options. Another drawback is that you need to keep your phone constantly charged. If the phone dies on you, you will be stranded, particularly if you are in the middle of an important purchase or dealing with an emergency. 

 

Difficult for tech-unsavvy 

India has a low Internet penetration of 34.8%(2016), according to the Internet Live Stats, and only 26.3% of all mobile phone users have a smartphone (2015), as per Statista figures. Besides the practical difficulty of going digital, “a bigger block is the psychological shift. You are suddenly jumping three generations to the digital medium,” says Pai. Adds Subramanyam: “It’s a problem for the older people, who may suddenly find themselves locked out of their accounts if they can’t download an app or don’t have cash.” The digital medium may prove a challenge for the tech-unfriendly people, who will need more time to adapt or the availability of other options to conduct transactions. 

 

Overspending 

While there is no denying the convenience of card or mobile wallet transactions, it could open a spending trap for an unsuspecting population. According to behavioural finance theorists, the pain of parting with money is felt more acutely if you use physical cash instead of a card. Hence, using cash instead of cards or mobile wallet acts as a natural bulwark for people who find it difficult to control their spending. “This is the reason that people could end up overspending, throwing their budgets into a disarray,” says Pai. 

 

Besides, a high penetration of the digital payment system is contingent on the fact that the same amount of cash does not come back into circulation. If it does, people are more likely to switch back to the former ease of using cash as it is a habit that they may find difficult to break. 

[kosingh]

Not happening. Forget about street hawkers. My parents don't even want to upgrade to smartphones. Not even after all this. I imagine there are thousands like them. Educated people who just don't trust technology or are not interested in adopting technology  or refuse to learn.

[tweaker]

Prime Minister Narendra Modi admitted on Sunday that he understands making the transition to cashless economy is difficult and hence he urges people to move to less cash society. However, the whole exercise of moving from cash-driven economy to cashless economy has somehow been mixed with demonetisation which was apparently done to suck out liquidity from the system to dig out black money.

[tweaker]

Goa is likely to become the first state in India to go cashless from December 31, as people will be able to buy perishables such as fish, meat, vegetables or anything else at the press of a button on their mobile.

[tweaker]

With recent announcement of Demonetization, digital payment wallets have gained immense traction and among the likes of FreeCharge and MobiKwik, PayTM seems to be leading the market with a majority.

[tweaker]

After shifting multiple goalposts on demonetisation, the Government has finally zeroed-in on making India a more digital, or, a less cash economy. 

So much so, that various prizes have been announced for people using digital currency in place of cash to conduct transactions. The Reserve Bank of India (RBI), on its part, has been releasing data on a daily basis to show how Indians are warming up to the idea of digital currency with each passing day. 

 

As per RBI, in the month of November 2016, a total of 671.5 million transactions took place with a total value of Rs 94,004.2 billion. 

 

However, between December 1 and 14, the number of transactions stood at 415.1 million with money spent to the tune of Rs 42,161.4 billion. 

[Singh bling]

Cashless transactions  are still distant dreams , Govt is lying that they have waived all charges, today I checked DHBVN ( Electricity board of Gurgaon ) website, thankfully I was able to see my bill  , but still they are charging 0.7% if you pay through Debit credit card , so even at present they punishing people which are going cashless

[wtachetna]

I agree with the above post. Digital transaction is only running in some major parts of the country. But most of the cities and villages people are dying because they cannot get their hard earned money. Neither they have ATMs nor do they have any digital mode of money transaction.

 

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Edited December 17, 2016 by wtachetna

[Rohit S. Ambani]

On 12/15/2016 at 7:03 PM, kosingh said:

Not happening. Forget about street hawkers. My parents don't even want to upgrade to smartphones. Not even after all this. I imagine there are thousands like them. Educated people who just don't trust technology or are not interested in adopting technology  or refuse to learn.

I gifted Nokia 230 (2.8" large screen) to my parents a week ago, they don't like touch phones.

[Rohit S. Ambani]

@anitajoshua Is it fair 2 levy convenience charge & tax on card payments when govt is forcing people 2 go #cashless 

 

 

[Rohit S. Ambani]

Whatsapp Viral -

 

Me to my newspaper vendor: Why don't you take digital payment ?

My newspaper vendor to me: Why do you still read a newspaper, why don't you read news online ?

[Rohit S. Ambani]

None of mobile payment apps in India fully secure, warns Qualcomm

 

"You will be surprised because most of the banking or wallet apps around the world don't use hardware security. They actually run completely in Android mode and users password can be stolen. Users use fingerprint which might be captured ... in India that is the case for most of all digital wallets and mobile banking apps," Qualcomm senior director, product management Sy Choudhury told reporters here.

 

"Reason we are saying that none of them is using it because we work with OEMs (original equipment makers)," Choudhury said.

[Mariyam]

5 hours ago, Rohit S. Ambani said:

@anitajoshua Is it fair 2 levy convenience charge & tax on card payments when govt is forcing people 2 go #cashless 

 

 

Ms Anita could do with a manicure.

 

Correct me if I am wrong but, charging a convenience fee is an agreement between the bank and the business for use of credit/debit cards. The bank passes the cost on to the customer.

The business in this case is the Delhi metro which is a part privately run entity. You can't entirely fault the government for the convenience fee.

 

The spurious logic that I've heard cinemas and metros provide for charging convenience fees is that usage of card holds up a line and hence they want to discourage people using cards and wasting the time of the others in the queue. Makes no sense as sites like makemytrip also charge a convenience fee.

[tweaker]

Union Minister Santosh Kumar Gangwar has said the government never talked of going 100% cashless, but even if the country achieves 15-20% success in going cashless it will be a big achievement.

 

He said cashless transactions will be an effective way to attain transparency, even if one-fifth of transactions were to take place sans cash.

[beetle]

On 12/15/2016 at 7:03 PM, kosingh said:

Not happening. Forget about street hawkers. My parents don't even want to upgrade to smartphones. Not even after all this. I imagine there are thousands like them. Educated people who just don't trust technology or are not interested in adopting technology  or refuse to learn.

t is not easy for the older generation.

I forced by dad and father in law to start using their ATM card like debit card. I have asked them to keep lesser amount in that account and use only one card.They both don't use netbanking and will just deposit cheques into this account from time to time.

[Singh bling]

Quote

कैशलेस सिस्टम को बढ़ावा देने गए पासवान के ऑनलाइन पेमेंट में छूटे पसीने

http://hindi.news18.com/news/politics/bihar-hazipur-ramvilas-paswan-paytm-digital-payment-cashless-payment-535681.html

 

According to this report after having tea Ram vilas Paswan wanted to pay through Pay tm , but system was slow it took half an hour.

 

Mantri ji ko pata nahi thaa ki paytm server Mantri aur aam aadmi mein difference nahi jaanta

[tweaker]

Demonetization has left all of India gasping. But some 200 households in the residential societies along the Baner-Pashan link road in Pune, near Mumbai, have been spared the pain of the sudden cash famine in India.

 

For them, solution was already in the making. They signed up back in June for a pilot project with Paylatr, a fintech startup enabling recurring offline grocery payments at neighborhood stores without cash or cards.

 

Here’s how it works: 

 

Paylatr extends a monthly credit of INR 5,000-8,000 to those who sign up with it. When they go shopping in neighborhood stores that are also on Paylatr, the customers literally pay later for the things they buy.

 

The merchant’s invoice goes to Paylatr and it sends a mail to the customer for confirmation. On confirmation, Paylatr releases the payment to the merchant. 

CEO and co-founder Rohit Bhatia likens Paylatr to Kenya’s Mpesa which started by digitizing money transfer to family members in villages, which was one of the most common transactions that happened periodically. “Paylatr is digitizing transactions between users and kirana stores (India’s version of mom-and-pop stores) which happens multiple times a month; so we’re going after a fundamental need.”