Level of Acceptance of Digital Payments - Transition from a Cash-Based Economy to Less Cash Economy

Abstract

The financial sector in India is seeing a major change and is going through an overhaul. The objective of this study is to understand the acceptance of a transition towards a less cash economy in India and how well it is accepted by the people. India currently, is a cash-based society and a conscious shift towards a less cash economy should not only include the efforts of the Government, but it should be an effort by individuals and enterprises at large. The payment system is over going a major overhaul and changes have been observed in recent years due to advancements in technology and innovations. The Digital revolution has taken the world by storm and digital transactions have emerged as a winner in the digital world. Digital technology will be at the forefront of major changes in the banking system in both the product side and the services side- be it in retail, education, banking, or health. Digital systems must be developed for the underserved people who have not been included in the banking system as of now so that they can access the services and lead a better life. Consumers now have a plethora of options to transact at the comfort of their homes. They have several payment options to choose from to complete the transaction. Cash has always and will continue to be a large part of transactions being done in India, but it is slowly reassuring those non-cash payments, especially those using electronic or digital modes are rapidly increasing. According to the report of Razorpay’s 'The Era of Rising Fintech', the country has witnessed a massive growth of 383 percent in digital payment transactions between FY'18 and FY'19. According to data released by National Payments Corporation of India (NPCI), after the nationwide lockdown was announced in March and fear of spreading coronavirus through cash transactions, digital transactions soared to 2.18 lakh crore in May 2020 alone. According to Boston Consulting Group (BCG) Report, the non-cash contributions for payment transactions are estimated to increase from 22% to 40% by 2020 and 59% by 2025. The banking system which has always been associated with credit facilities for the people is seeing a decline in credit growth. To bridge the gap, many non-banking players, NBFC's, microfinance institutes have extended credit facilities to unbanked people. These non-banking institutes have brought about a major change in which credit facility is disbursed among people in the form of micro-loans, flow-based lending, and group-based lending. Digital solutions are being demanded worldwide by consumers and in the days to come, credit facilities will also become part of the digital wave. FinTech’s will face a challenge to include all especially the underserved people to avail the credit facilities, but this will be a great opportunity for them to provide innovative digital solutions and bridge the gap that has been created by financially including every person so that the Indian economy can see tremendous growth. Technology is a must for digital financial inclusion of all and will create many opportunities, but it also risks widening the gap if inclusion doesn’t happen. We need to keep three points to include everyone in the digital wave and bridge the gap: a) Improve access and affordability b) Build infrastructure in rural areas c) Educate people on how to use technology. According to Ari Sarker of MasterCard, “In a bold new world emerging from disruption by the pandemic, digital payments will be a key pillar on which a self-reliant India will stand”. The primary study was conducted through a questionnaire to gauge the level of acceptance of digital payments. The data collected from 150 respondents stated that still a majority of people resist digital payment methods as a mode of transaction and prefer the traditional cash-based transaction method. The results of the survey are shown in data presentation section.