Driven by efforts aimed at “higher financial inclusion and adoption of mobile payments”, India posted an accelerated growth rate of 95 per cent in the volume of retail electronic payment transactions in 2018-19, a Reserve Bank of India report said.
Earlier, the growth rates were 71 per cent in 2015-16, 65 per cent in 2016-17 and 51 per cent in 2017-18. The high growth in FY19 was largely due to steep growth in Unified Payments Interface (UPI). “Card (debit and credit) payment is an important payment instrument which has replaced the use of cash at least in retail outlets and e-commerce sites,” the RBI’s ‘Benchmarking India’s Payment Systems’ report stated.
The volume of credit card transactions at PoS (point of sale) terminals and online was 1,762.59 million, valued at Rs 603,348 crore, in FY19. In the case of debit cards, there were 4,414.28 transactions valued at Rs 593,475 crore.
The RBI undertook a comprehensive exercise for benchmarking India’s payment systems by selecting a mix of 21 nations, spread across all continents, which included Australia, Brazil, Canada, China, France, Germany, Hong Kong, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, Singapore, South Africa, South Korea, Sweden, Turkey, the UK and the US.
“Despite the cost of digital transactions, the volume of payment transactions in India grew strongly and steadily at a compounded annual rate of over 40 per cent after 2012 and 2017, showing an appetite for modes of payment other than cash,” read the report prepared by the Reserve Bank’s Department of Payment and Settlement Systems.
Payment system transactions in 2017 grew by 44.8 per cent over the previous year (over a strong year-on-year growth of 56.4 per cent in 2016) even after cash availability normalised after demonetisation, showing that non-cash payments were slowly becoming a habit for the users. This is also demonstrated by the growth of 54.3 per cent in FY19 over the previous fiscal, the RBI said.
“The cost of digital transactions is an inhibiting factor for the growth of digital transactions. Merchants have to cash out or transfer to their bank accounts at a cost and at times these costs are passed on to the consumer,” the report said.
As of the end of the year 2012, India had 331.60 million and 19.55 million debit and credit cards, respectively, which grew to 861.70 million and 37.49 million, respectively, by the end of 2017. As on March 31, 2019, the number of debit and credit cards issued were 925 million and 47 million, respectively. In terms of debit cards, India is second only to China.
“An interesting fact is that while the debit cards issued were 861.70 million, as per the socio-economic profile only 33 per cent of the population reported having a debit card in 2017. This could be because of some persons having multiple cards and others none. In credit cards, while the growth is strong and better than all the benchmarked countries, there is still a lot of catching up to do so far as total number of cards is concerned,” the central bank said.
The RBI report said India’s debit and credit card payments is 0.5 times the cash in circulation; one of the lowest ratios amongst the benchmarked nations.
“The result is a combination of India having high levels of cash and low card usage. Indonesia and Japan have ratios comparable with that of India. It may be noted that the level of credit card penetration in India is low when compared to advanced countries… “ the report said.
Mumbai: In Sweden, going cashless is the norm, especially in large cities, the RBI said in a report. Purchases are made by cards or digitally, like Sweden’s most popular payment app, Swish. Many restaurants have stopped accepting cash. Buses and trains do not accept notes and coins, it said.
“This did not cause an adverse reaction in Sweden as everybody had an alternate payment system. Sweden being a pioneer in digital technology has facilitated its move to a cashless society,” the RBI said. Strong broadband coverage and a tech savvy population have also contributed. “The dependence on cash can be done away in India only when an alternate is made available to each and every person and the infrastructure is expanded,” it said. —ENS