Recently the Government has announced benefits for going with digital payments. The move is aimed at securing a transparent payment structure in the economy which is easily traceable and cost-effective.
Digital Payments | Regulations
RBI is the sole regulator for the payments industry space and derives its power to oversee the payments industry from the Payment and Settlement Systems Act (2007) and its accompanying regulations (2008).
Digital Payments | What needs to be done?
- A comprehensive legislative framework is required to regulate the e-transaction circle which might be adhered by all the payment gateways.
- A dedicated cybersecurity team should be installed in local (district) police stations with adequate manpower and technical know-how to address consumer grievances effectively.
- A close cooperation between the implementation and regulatory agencies is required to maintain consistency in operations and resolving of grievances. A central overseeing authority would enable dedicated technological upgradation of local capabilities.
- There is a need to support state sponsored payment gateway providers on the lines of RuPay debit cards, NPCI etc. In case of more efficiency, state-private joint ventures can be accommodated too.
- Further concessions for cashless payments from the banking sector is required to be accommodated in the form of motivating banks to abolish user charges and other service charges from the consumers.
- Special efforts are required to teach both the less tech-savvy as well as the unlettered on how they could use such modes of transaction.
- Infrastructure creation — from networks and connectivity to ensuring last-mile availability of ATMs and POS machines, especially in the rural areas — needs to be massively stepped up.
- A dedicated cell in the federal agencies like CBI, CBDT and ED is required to ensure people of security of transactions and locating ghost transactions.
- UIDAI-Aadhar enabled KYC norms should be upgraded and the layering technique should be adopted to overcome the difficulty of limited user information with the Aadhar servers.
- Systematic rolling out of more payment banks and e-payment gateways under the strict regulatory regime of RBI would bring more transparency, efficiency and price competitiveness in this sector.
Digital Payments | Merits
- This step will lead to shift in cashless transaction which will help in reducing tax evasion. Hence, tax base of the government will increase.
- This will help in reduction of cost overheads of printing notes, maintaining its security features and incidence of usage of counterfeit notes.
- Implementation of changes in monetary policy by central bank will show a faster effect in case of cashless transaction.
- These transactions will be documented hence will reduce the size of black economy.
- Incidences of loss of money through theft will reduce.
Digital Payments | Demerits
- If the system is not widely accepted, then it will reduce the revenue of the government.
- It will be difficult of the elderly population to shift to e transactions.
- Online transactions may cause cyber-crimes and cyber thefts.
- It will not cover be possible to cover rural areas where there is lack of awareness of e transactions.
Digital Payments | Conclusion
India is ripe for a transition to digital payments. While a cashless economy is not here, the move towards a less-cash economy has begun. Recent expansion in digital wallet usage and the introduction of specialized payments banks are good moves in this direction. But, a lot needs to be done before cash is eased out of the Indian economy.
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