Digital Economy Post Demonetisation

Demonetisation has pushed India in the race towards a digital economy. It is unprecedented in various aspects such as efficiency in management, tracking of economic transactions and real time information about the illegal activities being perpetrated under the nose of the Government agencies.

Digital Economy | Forms of Transactions

  • The most convenient form of digital transactions is internet banking. Through this money can be transferred to any account through RTGS, IMPS and
  • Mobile wallet services provided by banks and other private service providersfacilitate furnishing funds into the mobile wallet from the bank account or utilise private mobile wallet services providers. This sector has seen a massive growth after demonetisation. Various such service providers have been accorded the ‘Payment Bank’ status by the RBI.
  • Most common form of digital transactions is the use ofdebit cards and credit cards which are referred as plastic money cards. These cards can be used in Point of Sale (PoS) machines that are maintained by various vendors.
  • Government has come up with a transformative mobile platform providing exercise known as Unified Payment Interface (UPI) through which money can be transferred from one account to another such that both the users are connected to UPI platform.
  • For those who do not own a smartphone, Government has also facilitated USSD (*99#) service to make digital transactions directly linked to your bank account and phone number.

Digital Economy | Challenges

  • We are yet to fully realise the potential of mobile phones. There is no legislation passed by the parliament which legalises mobile payments. It’s a contractual payment.  India must come forward with a forward looking legal framework to support mobile payments at a time when 67% of all Indian online users are accessing internet from the mobile devices. If we do that the mobile payments will permeate across all urban sectors and will further go down to the rural and panchayat level. 
  • The majority of the mobile payment service providers are non-compliant with the strict provisions for dealing, handling and processing sensitive personal data including financial data as mandated by Information Technology Act, 2000 and rules and regulations made under.
  • Moreover, the Government has also failed to ensure cyber security of transactions and a dedicated Pan-India helpline for cyber complaints which facilitate one-point grievance registration for the new users.

Digital Economy | Need of the Hour

  • RBI has mandated certain parameters for information security. There is an Aadhar ecosystem which is available with more than 107 crore citizens which becomes a unique methodology to engage in participatory governance and also use Aadhar as a mechanism for promoting digital payments and mobile payments.
  • It is important that the existing frameworks must provide for adequate effective remedies and redress mechanisms available for customers per se. The banking network and nation as a whole needs to have a dedicated cyber security law on place which mandates the Rights, Duties and Obligations of all stake holders. At the end of the day effective remedies have to be given to the customer because in the entire digital ecosystem the customer is the king.
  • All the stake holders in the digital payment ecosystem have to go for the cyber insurance in a big way. Through this they will be able to provide redress mechanisms and relief to customers who are made victims to cybercrime in the digital payment ecosystem. Today there is no mandate to have cyber insurance covers which complicates the scenario.
  • Cyber insurance is the big way forward for providing consumer protection and for providing massive covers to the mobile payments service providers which help them to reduce their losses. In the longer run this helps in the robust growth of mobile payments and digital payments in India.

Digital Economy | Government Efforts

  • The government has announced that those who use online payments for buying railway tickets or insurance will be given specific discounts. This is a step in the right direction. This encourages citizens not just save money by doing online payments but also move broadly in the direction of digital payments.
  • Financial technology by start-ups has been used to link the information sources of bank accounts and mobile wallets so that there can be a reception and transmission of electronic payments.
  • Government has also started monetary rewards for those who are moving towards the digital economy. The initiative is managed by NITI Aayog.
  • On the other hand, various State Governments have also started similar monetary rewards and awareness campaigns to facilitate easier transition of people towards a digital economy.

Digital Economy | Conclusion

The customer wants his money to be secure, comfort in doing digital transactions without any hurdles and wants to be reassured that if there is a problem then some agency should be available where he can go through. If we are able to address these concerns, we will go a long way going forward in digital payments.

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