Government of India demonetized Rs. 500 and Rs. 1000 currency at the stroke of midnight rendering 86 percent of legal tender useless. A very bold move shocked both his friends and foe alike. There has been both felicitations and criticism to this decision as happens in any vibrant democracy.
India has more than 60 percent cash economy , means more than 50 percent of the transactions never sees any banking system. This is prone to black marketing , counterfeits , siphoning of currency for terrorist funding etc. This is a parasite for any economy. While economically developed nations has more than 60 percent of their transactions cashless.
India stands in the confluence of moving towards a digital economy with innovative make in India technology solutions. We can quickly embrace them without much effort.
We have more than 280 mn bank accounts and about 50 million cards. We have 680 mn mobile phones of which around 300 mn are smart phones. We have 1.05 bn digital identity (aadhaar) with digital payment address on aadhaar payment bridge.
a. Extensive use of Micro ATM to disburse cash:- Micro ATM’s are aadhaar enabled and has facility of online aadhaar authentication to provide service. This can connect to any bank where you have an account. IDFC , ICICI along with other banks already have micro atm’s in the rural areas. They are mobile and can be taken to the remotest corner of the country to exchange or disburse new currencies.
b. Use of RTGS/NEFT/IMPS to for instant transfer of cash from one account to the other. This is very useful for paying hospital and medical expenses, large fund transfer, payment of bills etc. While RTGS and NEFT have a working window , IMPS backbone is 24x7.
c. Use of aadhaar as a payment address. This can immediately replace cards with much lower cost and can be scaled to 1.05 bn in no time. There are some ATM’s which are aadhaar enabled .
d. Use of classical banking instruments like Cheque, Credit / Debit cards, ATM’s etc. Even small shopkeepers can have mobile POS in their shops.
e. Mobile wallet : With 300 mn smart phone and mobile platforms like paytm, airtelmoney etc. You can pay for small P2P or P2B transactions seamlessly. Even a tea vendor in Delhi has such facility and can be quickly replicated to small and medium retail business. No need to carry 100 or 500 rs. denomination. Mobile payments can revolutionize the cashless retail segment in India.
f. UPI :- This is a digital disruption . All you require a smart phone and a bank account . This platform is built by NPCI and launched just 6 months back. You will have a virtual address on your mobile like bsg@pnb.com , and can make any P2P payments. This virtual address can save you from a possible fraudulent activity. Most of the Indian banks have launched UPI app and others will follow.
All these digital mechanism can convert a cash economy to a cashless one. A blessings in disguise. You just have to use it. Lets make this viral and and make India a digital economic super power. How many countries in the globe have such powerful variants of digital payments platforms.
