A year after demonetisation: Digital transactions need higher adoption to sustain
, ET Bureau|
Updated: Nov 08, 2017, 12.54 AM IST
MUMBAI: Demonetisation led to the rapid evolution of digital payments. Transactions shot up in December and January, then stabilised over the following months, bankers said.
While cash in circulation at Rs 16.3 lakh crore is still at 91% of the pre-note ban days of Rs 17.9 lakh crore, digital transactions rose 31% from November last year to September this year, according to provisional RBI data. Digital transactions in September reached 877 million, down from the peak of almost 1 billion in December last year.
“If 100 transactions were happening pre-demonetisation, after the note ban it shot up to around 300, which now has stabilised around 180 or 190 levels.
Even the 80% to 90% jump would have taken at least three years under normal circumstances,” said Axis Bank executive director Rajiv Anand. “This is just the starting point. The more people get comfortable with the safety and ease of digital transactions, we will find higher adoption and a new normal.”
Bankers say the fact that digital payments are growing even while cash is slowly creeping back to pre-demonetisation levels is proof of changing habits.
This is also reflected in the spurt in debit card transactions at point of sales (PoS) terminals and a slump in ATM usage. Even the installation of new ATMs has been affected as bankers are concentrating on digital channels more than cash machines. New ATMs grew by a meagre 2% in August this year to 220,000 against 210,000 last year.
PoS usage grew 89% to 265.4 million transactions in August compared with 140.4 million last October, according to RBI. ATM transactions dropped 10% to 716.3 million from 802 million in the same period. PoS terminals have doubled to 2.9 million from 1.5 million in October last year.
“PoS infrastructure has definitely grown and new segments like doctors, educational institutions have also started installing terminals,” said Rajeev Agrawal, managing director of Innoviti Payment Solutions, which deploys terminals. “The challenge now is to get smaller towns and locations to start using these terminals, else the expansion will not be sustainable.”
Experts said average transactions per machine has dropped, which means terminals in small towns and cities may not be generating sufficient volumes.
“The government needs to push for a sustainable increase in digital transactions across the country, else banks under shove from the government will deploy terminals but there will be no return on investment,” Agrawal said.
“There have been structural changes like electronic toll collection, compulsory digital payments for educational institutions, digitisation of payments at petrol pumps,” said Bipin Preet Singh, cofounder of mobile wallet service MobiKwik. “Growth may have slowed down but there is a longterm impact on acceptance of digital payments.”
While cash in circulation at Rs 16.3 lakh crore is still at 91% of the pre-note ban days of Rs 17.9 lakh crore, digital transactions rose 31% from November last year to September this year, according to provisional RBI data. Digital transactions in September reached 877 million, down from the peak of almost 1 billion in December last year.
“If 100 transactions were happening pre-demonetisation, after the note ban it shot up to around 300, which now has stabilised around 180 or 190 levels.
Even the 80% to 90% jump would have taken at least three years under normal circumstances,” said Axis Bank executive director Rajiv Anand. “This is just the starting point. The more people get comfortable with the safety and ease of digital transactions, we will find higher adoption and a new normal.”
Bankers say the fact that digital payments are growing even while cash is slowly creeping back to pre-demonetisation levels is proof of changing habits.
This is also reflected in the spurt in debit card transactions at point of sales (PoS) terminals and a slump in ATM usage. Even the installation of new ATMs has been affected as bankers are concentrating on digital channels more than cash machines. New ATMs grew by a meagre 2% in August this year to 220,000 against 210,000 last year.
PoS usage grew 89% to 265.4 million transactions in August compared with 140.4 million last October, according to RBI. ATM transactions dropped 10% to 716.3 million from 802 million in the same period. PoS terminals have doubled to 2.9 million from 1.5 million in October last year.
“PoS infrastructure has definitely grown and new segments like doctors, educational institutions have also started installing terminals,” said Rajeev Agrawal, managing director of Innoviti Payment Solutions, which deploys terminals. “The challenge now is to get smaller towns and locations to start using these terminals, else the expansion will not be sustainable.”
Experts said average transactions per machine has dropped, which means terminals in small towns and cities may not be generating sufficient volumes.
“The government needs to push for a sustainable increase in digital transactions across the country, else banks under shove from the government will deploy terminals but there will be no return on investment,” Agrawal said.
“There have been structural changes like electronic toll collection, compulsory digital payments for educational institutions, digitisation of payments at petrol pumps,” said Bipin Preet Singh, cofounder of mobile wallet service MobiKwik. “Growth may have slowed down but there is a longterm impact on acceptance of digital payments.”
