Digital Payment in India

Ratan Watal Committee -2016

• Committee on Digital Payments headed by Ratan P. Watal has submitted its final report to the Union Finance Ministry
• It recommended different steps for promoting digital payments

C.Babu Naidu Chief Ministers’ Committee to PM 2016-17

• It also constituted for promotion of digital payments
• Its submitted its report in Jan 2017

Cash Payment

Pro

• instantaneous settlement,
• relative anonymity,
• notion of security associated with holding physical value

Con

Sponsored

• cost of printing new currency (Rs.27 bn in 2015)
• ATM networks cost, Security
• Accidental loss or theft
• ‘Wage loss, travel cost to collect cash from Bank, ATM
• Fake Indian Currency Note (FlCN), Terror and naxal finance, Black money, leakage (74% consumer payments in cash)
• Printing receipts paper, ink environment.

Digital Payment – Pro

• Govt. payment alone can save 1 lac Cr.
• Transaction tracking
• Stop ponzi scams
• Less moneylenders

Challenges

PoS

• ATM per million – 165 (one of the lowest in the world)
• PoS terminal per million – 2548 (one of the lowest in the world)
• Service tax on service charge- 15%, Merchant discount rate- 2%
• KYC norms and documents

Sponsored

Merchant discount rate (MDR)

• Merchant discount rate is the rate charged to a merchant for payment processing services on debit and credit card transactions.
• The merchant must setup this service and agree to the rate prior to accepting debit and credit cards as payment.

Interoperability

• Problem in interoperability in three way
• Electronic money interoperability – wallet to wallet transfer
• Payment network interoperability – wallet money to settle credit card payment
• Finance institution interoperability – wallet to Bank emi or insurance
• Now RBI gave permission for interoperability in wallet to wallet transaction

Scams

• Low financial literacy
• Hidden charges and misinformation
• Lack of Data privacy law
• Lack of Monitoring on electronic money

Govt. not role model

Sponsored

• Govt need to take digital payment on their service
• Govt. don’t pay to supplier by digital payment
• Govt. can save 1 lac Cr. By doing digital payment

Awareness

• Vittiya Saksharta Abhiyan (Visaka) – Ministry of HRD

Behavior Change

• Give promotional incentives to change behavior
• Restriction –
  • Company depreciation/deduction by digital payment
  • Cash payment maximum limitation

BPSS

Sponsored

• Board for Regulation and Supervision of Payment and Settlement Systems
• Its a sub-committee of the Central Board of the Reserve Bank of India
• It is the highest policy making body on payment systems in the country.