As a result of demonetisation and restrictions on cash withdrawals, the number of digital transfers jumped 43 per cent in December from November. While the increase in digital payments in a welcome development, it is difficult to assess whether such modes of payment will become a habit. Given that people continue to withdraw cash from bank accounts, the increase in digital transactions may very well be shortlived. As cash availability normalises, chances are that many will lapse into the old habit of cash payments.

Representative data published by the RBI suggests that India can become a less cash-dependent economy gradually, and that those at the lower end of the economic strata are embracing technology. Of particular interest is the rise in use of Unstructured Supplementary Service Data (USSD) and Unified Payments Interface (UPI). USSD transactions climbed from 7,042 in November to 1.02 lakh in December, a jump of 1,352 per cent, and UPI transactions climbed from 2.87 lakh in November to 20 lakh in December, a jump of 592 per cent. Still, these are very small numbers.

The usage of debit and credit cards at point of sale (POS) machines, too, climbed: the number of transactions rose to 31.10 crore in December, up from 20.55 crore in November. However, we do not yet know if usage at POS was driven by debit or credit cards, as the RBI has published consolidated figures for payment cards. Traditionally, debit cards are used more to withdraw cash than to make payments at POS machines.

The Government is euphoric about the nearly 5 million downloads of the BHIM app launched on December 30. Of course, these do not necessarily translate into usage. Nor will the lucky draws. Digital payments need to be made a habit with newer incentives and cash payments disincentivised.

Senior Deputy Editor

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