Govt to incentivise online payments to push digital transactions
The government will push digital payments afresh as they appear to have lost momentum a year after the promotion of cashless transactions was announced as a key policy objective of demonetisation.
As improved supply has made cash the preferred mode of payment again, the government plans to incentivise apps such as BHIM and the Bharat Bill Payment System (BBPS) — the interface for utility payments — and make digital payments easier, according to a ministry note.
The incentives could include cashbacks and reward points for BHIM users. As competition intensifies among private mobile-wallet operators, the government is looking to promote BHIM while ensuring compliance with a strict cybersecurity protocol.
The note presented last week by the ministry of electronics and information technology to Parliament’s standing committee on finance detailed a five-step road map to push e-transactions.
“Digital payments to be made visibly cheaper than cash,” the note said.
About 99% of remonetisation of the banking system was complete by August, according to RBI data.
From their highest volume of 957.5 million seen in December last year, digital transactions stagnated in the past few months, data show. The transactions dipped to 861 million in July and rose to 883.4 million in August, only to decline again to 865.8 million in September.
Interoperability between digital payment platforms will be introduced in six months, officials said.
“There is a cash referral and merchant cashback scheme that UPI BHIM has adopted, we need to expand it, to make it more lucrative to use BHIM,” a top official in the ministry said.
The note also talked about increasing the adoption of the BBPS and printing of a Bharat Quick Response (QR) code to facilitate easier government bill payments.
For example, an electricity bill should have the Bharat QR so that it can be easily paid by scanning the code, using the BBPS gateway.
“The aim is to roll out BBPS at the earliest, so that an umbrella gateway is created for paying all government bills. This will stop cash leakage and pilferage,” said a government official in the know of the matter.
The note said the merchant discount rate, the money that banks charge for card transactions, would be rationalised on debit cards.
The government plans to cap the rate below the existing level of 0.5-1%, sources told HT. A lower rate would encourage even smaller retailers in rural India to shift to card transactions.
Earlier, Prime Minister Narendra Modi had launched a lottery for e-transactions to attract more people and merchants to cashless platforms. The government offers discounts on digital payments for rail tickets, insurance premia, toll-gate passage and refuelling at petrol pumps.
“We have reached 50 lakh transactions in a day through UPI BHIM from just 15 lakh two months back. The aim is 2,500 crore digital transactions by the end of 2017-18. That means 8 crore digital transactions per day,” said Ajay Kumar, additional secretary in the ministry of electronics and IT.
Thirty-eight banks are now associated with the BHIM app, the note said.
“The aim is to link at least up to 60 banks by April 2017, even private wallets should be integrated with BHIM,” said a source familiar with the government’s digital road map.
Paytm, the most popular mobile wallet in the country, has 100 million users a month while MobiKwik has 40 million.
Since its launch in December 2016, BHIM has been downloaded over 16 million times, according to data available with the NPCI, the government’s payment gateway.
“The key to increasing e-transactions is investment in infrastructure by digital transaction organisations, so that cash supply levels do not impact it. Money should also be spent on communicating the benefits of digital transactions to people,” said MobiKwik co-founder Upasana Taku.
The Centre also wants to launch a “syndicated campaign” with banks, departments and states for growth of digital payments.
The government argues that digital payments will facilitate financial inclusion and easier access to credit apart from ensuring transparent fund flows and a reduction in the cost of cash.
“The government is looking at strengthening the digital payment infrastructure to push more and more people towards it,” said a government official part of the discussion on e-payment incentives.