Demonetisation may not have gone down too well with a majority of the population, but digital payment companies are cheering it. There has been a surge in volumes and value of digital transactions in India during 2016-17.
According to Reserve Bank of India’s report on ‘Trends and Progress of Banking in India (2016- 2017)’, nearly 89 per cent of the non-cash retail payments in terms of volume and 63 per cent in value terms were undertaken through cards and electronic modes during 2016-17.
The volume of transactions through prepaid instruments (PPI), which includes PPI cards (mobile prepaid instruments, gift cards, social benefit cards, foreign travel cards and corporate cards), and mobile wallets jumped over two-fold in FY17 compared to FY16.
The volume of PPIs grew to 1,964 million as at end-March 2017 from 748 million in the previous year. In value terms, PPIs nearly doubled to ₹85,000 crore at end-March 2017 (₹46,000 crore in the previous year).
“The withdrawal of high-denomination SBNs (specified bank notes) provided a boost to the objective of a less-cash society as people shifted to card-based transactions and various modes of electronic payments,” the RBI report said.
The unified payments interface (UPI), which was introduced in 2016-17, to allow customers to pay directly from a bank account to different merchants, both online and offline, saw 17.9 million transactions worth ₹6,950 crore.
Momentum to continueIn a bid to boost digital transactions and encourage small businesses to start accepting card payments, the RBI had recently revised the merchant discount rate (MDR) charges, or the commission paid by a merchant to a bank.
The revision, which is to come into effect from January 1, requires small merchants (those with revenue of less than ₹20 lakh) to pay 0.4 per cent of transaction value or ₹200, whichever is lower. For other merchants, MDR is 0.9 per cent of transaction value (or ₹1,000).
The government also announced its decision to reimburse MDR applicable on transactions worth ₹2,000 to give a fillip to electronic payments.
According to Dewang Neralla, MD and CEO, Atom Technologies, digital and card payments, which currently accounts for 5-8 per cent of the economy, is expected to grow to 30-35 per cent over the next three to five years.
“The recent spate of announcements will encourage more merchants to accept digital payments, apart from bringing more number of people on to the digital payment platform,” Neralla told BusinessLine .
As India moves towards a less-cash economy, digital payments are estimated to grow 10 times, from $50 billion last year to $500 billion by 2020, said Vineet Singh, Chief Business Officer, MobiKwik.
“Cutting-edge technological interventions will enable consumers to access top-end services like insurance policies, loans, investments, saving options and cross-border remittances through hand-held devices,” he said.