Digital Transactions and Emergence of New Less-Cash Economy—Rising Avenues of Growth in India

Digital transactions are growing at a phenomenal rate in India, which aims to become a cash-lite or a less-cash economy. This is just one of the indicators of growing intervention of technological and digital disruptions in the economy. In a couple of years or so, paperless transactions are expected to become a norm.

Reserve Bank of India has reported a thriving 58.8 per cent growth rate in the digital transactions of India during 2018-19. According to an RBI estimate, the number of digital transactions is expected to increase more than four times, from Rs. 2,069 crores in December 2018 to Rs. 8,707 crores in December 2021. According to a KPMG report, number of merchants accepting digital payments modes has increased to over 10 million in a short span of 2 to 3 years and global digital payments market is expected to touch $10.07 trillion by 2026.

Story of digital transactions in India picked up aggressively after the Government of India launched the anti-corruption drive by demonetizing the Rs.500/- and Rs.1,000/- currency notes in November 2016 to curb the menace of black money in circulation in economy. Since then, India has moved on quite fast to adopt a cashless economy. Though the impact of this step was tremendous for the common man, which had led to horrible shortfalls of cash in hand, this also led to the rationing of cash-based expenditures resulting in the adoption of non-cash avenues of payment on priority.

Benefits of cashless economy, or less-cash or cash-lite for that matter, are many. Issue of counterfeit doesn’t exist in cashless transactions and, therefore, cross-border terrorism and black market that chiefly run on counterfeit currencies will not survive. So, there will be less of black money or that many instances of tax evasion. Added advantage would be: no trees would be sacrificed and there will be huge reduction in government expenditure owing to non-printing of paper money.

Facilities like USSD (which permit mobile banking without smartphone or data/ internet connection), UPI (unified payment interface) which requires smartphones, credit/ debit cards, net banking and e-wallets, etc., is helping spread the culture of online or digital transactions across the country.

In a research paper titled Antecedents of electronic wallet adoption: a unified adoption based perspective on a demonetized economy,published in the International Journal of Business and Emerging Markets[1], Pallab Sikdar, Amresh Kumar (an FIIB faculty) and Md. Moddassir Alam have studied various influential factors and characteristics of e-payment techniques that consumers consider in all sincerity as they opt for e-commerce over the traditional commercial methods. They analyzed 462 responses from the demonetized India, where the majority of respondents were either employed or full-time students, and 77 per cent of the respondents were aged below 35.

These researchers applied structural equation modelling to the primary data and employed UTAUT2 framework in the investigation of factors that generate usage intentions for the e-wallet applications and the extent to which such intentions translate to final usage behaviour. Their findings reveal positive significant intention-based causations arising from social influence, performance and effort expectancy, price value and facilitating conditions. Other elements like fun and pleasure, and past experience in terms of usage did not have considerable bearing on the e-wallet adoption behavior.

Researchers further recommend more of such conceptualized studies to be carried out in other demonetized economies, which can provide rich insights on overall generalizability in the context of technology adoption in emerging economies. This in turn can also offer regulatory implications towards formulating policies for strengthening payment infrastructure at the institutional level.

In an e-payment environment, where physical manifestation of money is increasingly getting diluted, traditional wallets are being substituted by the electronic wallets. An efficient payment system that constitutes the foundation of all financial transactions is quite vital in securing the stakeholders’ trust and thereby achieving the benefits within deadlines.

Today, the rise in the popularity and success of various e-commerce platforms can safely be attributed to the efficacy of the safe and convenient e-payment systems; and it is no wonder that the traditional commerce and markets are finding it quite tough to survive and thrive. Digital Payment companies today are among the fastest growing enterprises. KPMG reports that India has more than 45 mobile wallet providers and some 50 UPI-based wallet providers, and there is still quite a large scope for growth. Social media platforms like Facebook, and SMS apps like WhatsApp, are also planning to launch their payment services soon.

[1] Vol. 11, No. 2, 2019.