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Can India really ever go cashless?
This was one of the topics that was discussed at a talk organized recently at Cadence in which we had invited Bhaktha Keshavachar, CTO and Co-Founder of Ezetap Mobile Solutions, to talk to Cadence employees about payment solutions in India. For those of you who haven’t heard of Ezetap, it aims “To be the single solution through which businesses in India complete any financial transaction with their customers, supporting every instrument and method that their customers want to use,” according to CEO Abhijit Bose. Founded in 2011, in just five years they were ranked No 3 globally by CNBC in their Disruptors List 2016.
Bhaktha started by painting a picture of where India is right now – on the brink of a revolution in financial services, according to him. One of the most significant developments that is fuelling this revolution is the India Stack. The India Stack aims at presence-less, paper-less, and cashless service delivery. It is a set of APIs such as Aadhaar, Unified Payments Interface (UPI), DigiLocker, etc., that allows governments, businesses, startups and developers to utilize a unique digital infrastructure to enable the economy.
India is one of the most cash-intensive economies of the world. According to Bhaktha, a whopping Rs 12.3 Trillion in cash is in circulation. Clearly the economy has recovered from what is popularly known simply as “demonetization”, a reference to the red letter day of Nov 8, 2016, when the Indian Government led by Prime Minister Narendra Modi announced the demonetization of Rs. 500 and Rs. 1,000 banknotes, an effort to wipe out (or greatly reduce) the black market economy.
Given this heavy reliance on cash transactions, a cashless economy seems almost impossible to envision. However, Bhaktha chooses to look at it as a massive opportunity rather than a problem. The Government does too, and is pushing us towards a more digital ecosystem through the Digital India Program, an initiative that aims to promote digital literacy, state-of-the-art digital infrastructure, Internet for all, and a transparent system. For rural India, it means a better standard of living, increased employment, and a sense of empowerment.
The Government is so serious about it that they even have a website dedicated to the vision of a cashless India: http://cashlessindia.gov.in/. Here is a video that talks about the cashless economy:
While the Digital India Programme is an umbrella term that targets several areas, a huge focus is on transforming the mode of payments from a traditional cash-based system, to one that is cashless. Certainly demonetization has spurred urban Indians at least to embrace digital payments. This is where companies like Ezetap come in.
To facilitate ease of transactions the National Payment Corporation of India (NPCI) has developed Aadhaar Enabled Payment Systems (AEPS) that allow POS devices to enable transactions with a 12-digit Aadhaar identification number. With AEPS, bank transactions like cash withdrawal, cash deposit, balance inquiry, and cash transaction between Aadhaar funds can be performed. With this system, biometric authentication will replace cards and cash. This system imitates ATMs. Working like a micro ATM, it includes a scanner for biometric authentication, an in-built keypad, and a printer.
The NPCI has also launched what is known as the Unified Payments Interface (UPI) that allows you to make transactions with only your mobile number, Aadhaar number, virtual payments number, and a QR code. The UPI payment mode does not require bank details, and phones are used as virtual debit cards.
For those in rural areas, unstructured supplementary service data (USSD) is another mode of payment specially for those who don’t have access to internet. The best part about this mode of payment is that it does not even require a smartphone - a basic phone model will suffice. Pressing a few keys will bring you in contact with an electronic voice system that enables you to carry out transactions as low as Re. 1.
These are all steps in the right direction and moving towards more digital payments can only be a good thing. But I wonder if going cashless raise another problem - getting rid of trillions of rupees of bank notes!