Heading Towards a Cashless Economy
Debit and credit cards have started to take the place of cash all around the globe and the time is not so far when the term ‘cashless society’ becomes a reality. Everyday products and services for which one used to pay using cash are now being paid for using cards. In fact, your next festive purchase or that long overdue vacation can now be possible without having to worry about carrying or using cash.
Did you know that Sweden was the first country to introduce bank notes way back in 1661? And now 350 years later most of the cities in Sweden don’t accept cash payments. Public transport, small businesses, museums and even churches now accept either card payments through card readers or digital payments. According to the Bank for International Settlements the cash-GDP ratio is only 3 percent in Sweden compared to an average of 9 percent in the Eurozone, 7 percent in the U.S and 12 percent in India.
Emerging economies like India have taken the plunge and started witnessing the shift towards this trend through initiatives such as Prime Ministers Jan Dhan Yojana scheme. In 2015, 700 lacs accounts have been opened with 370 lacs Rupay cards been issued so far under this scheme. Moreover, the government has proposed tax benefits for customers making payments through cards and also for merchants accepting card payments. In European countries such as France and Belgium, govt. has disallowed any cash transactions over 3000 Euros. Similarly in India, high value transactions of more than 1 lakh are mandated to be settled only by electronic means. By limiting the usage of cash, it becomes easier for the govt. to record the financial transactions, collect tax revenues, curb illegal transactions and take measures to fix the loop holes in the system.
Even though cards issuance is increasing rapidly, the mechanism to accept cards have not reached its full potential. As of October’ 15 there are 2.32 crores credit cards and 61.53 crores debit cards Issued in the Indian market. The number of POS machines to handle these figures are just a mere 12 lakhs leaving a huge gap between the number of cards issued and the POS terminals deployed. Major retail giants generally have couple of POS terminals deployed in their stores to manage large number of payments, which leaves out the small and medium business owners (approx. 5 crores) who still rely on cash and don’t find it economical to have a POS from the bank.
The card wave has already hit the country and with innovative solutions such as mPOS, merchants can now be fully equipped. Imagine adding just 1 percent to the overall 12 lac figure by deploying mPOS solutions, can have a direct impact on country’s GDP. mPOS is a low cost and affordable solution that lets merchants turn their smartphones into card acceptance device by downloading an app and connecting to the card readers.
Even though debit cards have been popular among the younger population, it’s the advent of mobile wallets and other payment apps that are not only convenient but easy to use have become their go to solution for payment needs. Just by linking their cards to the wallets, recharging their phones and paying bills becomes a child’s play. Through the launch of Jan Dhan Yojana, Digital India program, mPOS and mobile wallets the foundations have already been laid and paved the path towards cashless India.
Chief Commercial Officer