Digital payments set to become the norm and cash the exception in India | analysis | Hindustan Times
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Digital payments set to become the norm and cash the exception in India

The challenge that lies ahead for FinTech disruptors is to ensure that consumers use digital payments as comfortably as she has used cash.

analysis Updated: Dec 02, 2016 19:46 IST

Prime Minister Narendra Modi’s Digital India programme is an attempt to create a digitally empowered society, with financial inclusion contributing to a robust formal economy. The main idea behind this vision is not just connectivity, but about how to leverage that connectivity in enabling consumers, small businesses, traders and farmers to harness technology to maximise efficiency and productivity.

The data exhaust that this digitisation will produce can be leveraged for a host of applications. The Jan Dhan-Aadhaar-mobile trinity and cashless initiatives are the backbone of the reforms and development agenda.

Demonetisation will give a much required push for consumption to be digitally driven and payments to go cashless. Banks can open new accounts using Aadhaar-linked e-KYC mechanisms. Consumers can make payments to merchants using the Unified Payments Interface.

Read: Demonetisation pangs will last for a quarter, but benefit India in long run: FM

Merchants will benefit from receiving payments digitally at the lowest costs possible. They can raise invoices with GST-enabled software and get appropriate tax credits in their bank accounts. Tax collections will increase and evasion will come down as electronic transactions grow. Small business owners and micro-entrepreneurs will have greater capacity to act as mini-multinationals in their own right reaching out to make transactions, offer services and interact with other parties in new forms of collaborations across traditional geographical boundaries along the supply chain.

The demonetisation of old currency is a bold move not only for economic and security reasons but for offering an inflection point to leapfrog a few generations into the future and take ownership of the digital industrial revolution.

The challenge that lies ahead for FinTech disruptors is to ensure that consumers use digital payments as comfortably as they have used cash.

Read: What black money? Govt may be in for shock after demonetisation

The first few weeks after the demonetisation announcement saw a multifold increase in usage of cards, mobile wallets and mobile payments. Digital infrastructure is being rolled out faster than ever. For digital methods to be sustainable and as acceptable, pervasive and inclusive as cash, they need to be low cost, work in poor connectivity environments, on basic feature phones and offer the same level of trust as cash. With frugal innovation unleashed by the IndiaStack, is a set of APIs that allows governments, businesses, startups and developers to utilise a unique digital Infrastructure to solve India’s hard problems, these challenges can be overcome by entrepreneurs.

Read: Demonetisation gains uncertain, says Nobel laureate Paul Krugman

India is heading towards a digitally empowered society where digital payments are set to become the norm and cash the exception.

Arvind Gupta heads the BJP’s Information & Technology cell.

The views expressed are personal.