BENGALURU: There are early signs that India is finally turning into a digital payment economy less dependent on cash. For the first time, in the fourth quarter of 2019, the value of card and mobile payments at Rs 10.57 lakh crore exceeded ATM withdrawals which amounted to Rs 9.12 lakh crore.
After overtaking cash withdrawals, digital payments extended its lead in the first quarter of 2020. Card and mobile payments are now at Rs 10.97 lakh crore, even as ATM withdrawals declined 5% to Rs 8.66 lakh crore. If bankers are to be believed, the pandemic-induced lockdown has already put this transformation on a fast-track.
“This trend continued through April and May with physical restrictions and lesser movement of goods and people with the lockdown. India’s posted the sharpest growth in digitization in this period compared to America, the UK, Thailand and Singapore. This is mostly on the back of UPI,” said Sampath Sharma Nariyanuri, fintech analyst, S&P Global Market Intelligence.
This trend is likely to continue, said bankers. “This situation is not comparable to what happened post-demonetisation. No one knows how long this coronavirus situation is going to last. For the foreseeable future businesses know they cannot transact physically. Given the ease, speed and security of doing business and the infrastructure now in place at many businesses, we don’t expect a shift back to cash,” said Shekhar Bhandari, senior vice president, Kotak Mahindra Bank.
While UPI payments did post a slight dip in April to Rs 1.51 lakh crore, it soon recovered to Rs 2.18 lakh crore in May; higher than pre-Covid levels. “UPI shot past card payments last year and now we can see it extending its lead. In December 2019, UPI saw Rs 2 lakh crore transactions versus card payments seeing about Rs 1.5 lakh crore — by May Rs 2.18 lakh crore UPI transactions versus Rs 80,300 crore in card payments,” said Sampath.
Bankers say digitization is seen across segments — retail, SME and unorganised business sector. “Many customers, who did not move to digitization for 5-6 years, moved in under 20 days. So technology has become the biggest beneficiary from this crisis while also being the biggest enabler for business continuity,” said Bhandari.
This shift to digital payments is happening even as the currency in circulation is rising with there being a global ‘dash for cash’ as described by RBI governor Shaktikanta Das. According to RBI data as on July 10, currency in circulation stood at Rs26.8 lakh crore, up 21.4% year-on-year.
But even as people are holding more cash during the pandemic, payments handled by mobile devices are soaring in India, driven by the popularity of bank accounts as an in-app payment method. “Unlike Apple Pay or other mobile wallets that allow customers to make electronic transactions using a linked debit or credit card, popular payment apps in India promote an alternative to cards,” said the S&P report.
Mobile payments initiated by payment apps comprising account-to-account transfers and payments made from stored-value accounts rose 163% to $287 billion in 2019. By comparison, point-of-sale transactions completed using debit and credit cards, including online and in apps, rose only 24% to $204 billion.
“From mobile recharges, utility bills to online e-commerce, payment apps (UPI) is becoming a popular alternative to cards. For one people are not always comfortable sharing their card details, CVV number, etc. And secondly it’s a more cumbersome process. UPI transactions have that additional layer of masking all bank details — and are faster and seamless,” said a National Payments Corporation of India (NPCI) official.