![]() A recent survey, on the readiness of consumers towards adoption of newer payment technologies, ranked India second out of 27 economies on the FinTech adoption Index. While it is critical to push for technological innovations and policy reforms, it is also imperative to understand the aspects that motivate or hinder the adoption of these technologies by the end-user. Our paper seeks to highlight the important factors at the individual level, which influence the consumer’s decisions to use cash or digital payment. Additional payment systems such as Bharat Bill Payment System (BBPS), National Electronic Toll Collection (NETC) system, RuPay cards and AePS have also boosted digital payments and the intent to incorporate modern-day technologies such as tokenisation and contactless payments will further the progress.ĭespite this progress, cash use still seems to be on the uptick in India. PoS terminals and lightweight acceptance infrastructure such as QR codes have boosted Card/PPI based payments. The number of PoS (point of sale) terminals have also increased by about 40 lakhs in the last five years. The launch of UPI, along with already available digital payment modes like NEFT, IMPS, cards and Prepaid Payment Instruments (PPIs) has increased the options available to the consumer. Recently, NEFT (National Electronic Funds Transfer) was made operational for 24 h on all days of the week, and RTGS (Real Time Gross Settlement) is expected to follow soon. Enablers such as Jan Dhan accounts, Aadhaar and penetration of mobiles, and policies like Demonetisation and Goods and Services Tax have brought people closer to technology and banks. The government of India and the RBI have been working in synergy to push for policy and regulatory reforms. The progress in digitisation has been driven by a healthy mix of technological innovation, policy interventions, and expansion and strengthening of existing infrastructure on the supply side, coupled with an increasing proportion of the population adopting financial and digital instruments on the demand side. The Unified Payments Interface (UPI), a payment system that was launched in 2016, has surpassed the milestone of a billion transactions per month. Digital payments recorded an increase of 46.5% in total volume in FY19 on top of an increase of 60.6% in FY18. In the last decade, India has rapidly digitised its payment systems and promises huge potential in the area. But on the other hand, there are also huge implicit costs to digitise the existing systems and nudge people to change. A 2014 study found out that residents of Delhi spent around 6 million hours and ₹91 million to access cash, while the Reserve Bank of India (RBI) and commercial banks together spent about ₹210 billion towards currency related operating expenses in the same year. While cash may not seem to impose any direct transactional cost like digital money, it is still costly for both governments and end-users. Research in the behavioural sciences conveys that people experience higher ‘pain of paying’ when paying in cash than digitally, and this contributes to deferred payments. In fact, governments around the world have taken drastic measures at huge costs to clear markets of ‘black money’. While it provides a suitableĪlternative to aid the informal or parallel economy, digital payment offers itself as a desirable tool for institutions to fix this problem of traceability. While cash might seem convenient as it’s ingrained in our habits and is still readily accepted at more places, digital payments offer convenience by saving time and labour. Therefore, the discourse on the current age payment system revolves around cash vs digital transactions. Cash, however, remains a crucial part of the trade. ![]() Evidently, to suit these needs the payment systems are being digitised globally. Modern day trade demands massive payments to be settled fast over long distances with minimum transaction cost. ![]() But, what has not changed over the years is what money does broadly, it facilitates trade in goods and services as medium of exchange and acts as a credible store of value. The consensus around the origin and the forms of ancient money has kept changing over the course of recorded history.
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