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In a world that is going digital, cash is still king - AGS India

While digital payments is growning at a rapid pace especially post pandamic, cash will continue being the most preferred mode for most Indians in the future as well.<br>

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In a world that is going digital, cash is still king - AGS India

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  1. In a world that is going digital, cash is still king- AGSIndia Even though digital payments are on the rise, cash continues to hold its throne. In an economy like ours, we are likely to continue witnessing the coexistence of both cash & digital payments. The Indian economy has been in a constant state of evolution. From using precious metals, cowrie shells, and currency notes to nowintangiblepayment modessuch ascards, BHIMUPI, QRcodes, andRFID – the payment landscape is evolving at a rapid pace. However, one mode that hasstood the test of time iscash. While India has predominantly been a cash-intensive economy, two events may have challenged the status quo – Demonetisation & Covid-19. They brought about a change in people’s payment habits. Before demonetisation, digital payments were very nascent in India. In just a matter of few years, digital payments have gained extraordinary growth, with the volume of transactions increasingat a CAGR of 36%. Interestingly, cash in circulation isalso now about 14.5%of GDP. According to the data released by RBI, ahead of Diwali, the currency with public rose by Rs 15,582 crore. On ayear-on-year basis, it has increased by Rs 2.21 lakh crore. This is an indicator that despite the rising demand for digital transactions, cash hasstill seen an upward curve. Letuslook atvarious reasons for this increase: 65.07%ofIndiansstillreside inruralareas India is a country with a wide customer base coming from urban, semi-urban, and rural areas. Interestingly, the rural populationconstitutes over 65% of the

  2. total population of India. While the penetration of digital payments is deep in metro cities and semi-urban areas, the rural counterparts continue to transact in cash; for which they rely on traditional channels such as the bank branches and ATMs.Newer services such asmicro ATMs or Cash@PoSare playing an importantrole in meeting rural India’s cash needs. AsIndia is an agrarian economy, it is observed that cash withdrawals increase duringthe cropharvest season,which isusually betweenMarch andApril. DirectBenefit Transfer (DBT) Thevalue of fund transfers by the means of Direct Benefit Transfer increased from ₹619.4 billion during financial year 2016 to ₹5,525.2 billion during financial year 2021. These schemes enable beneficiaries to receive benefits directly into their accounts. This amount can only be withdrawn using AePS or ATMs, therebyincreasingthe moneysupplyin thecountry.Moreover, thereare 43.90 crore beneficiaries of the PMJDY (Pradhan Mantri Jan Dhan Yojana). These initiatives will result in increased currency with the public as more people willcome under the segmentof ‘banked population’. Thepandemicpush During the lockdown, many people withdrew large amount of cash as a preventivemeasure andto avoidfrequent visitsto theATM owingto restrictions during nationwide lockdown. In fact, the average ticket size of withdrawals at any given time went up by almost 20 per cent. While digital acceptance was gaining momentum, there were many merchants who were not equipped to go ‘digital’completely.Thiscouldbebecauseoffactorslikecostof implementation and lack of awareness among merchants – especially small shop owners & vendors. Hence, customers had continued to make payments in cash fortheir day-to-day essentials.

  3. Additionally, it was observed that many retailers began offering Cash@PoS servicesto cater tothe increasing cashneeds of theircustomers. Unbankedpopulation Thereareabout15croreIndianswhostilldonothaveabankaccount. Moreover,many Indians are daily wage earners – earning their livelihood by the meansofcash.Alltheirday-to-daytransactionstakeplacebythemeansof cash. Regulatorypolicies Recently,the Ministerof Statefor Finance BhagwatKarad saidthat outof the 2.13lakhATMsinthecountry,47%areinruralandsemi-urbanareas. Moreover, the RBI has apprised all White Label ATM operators to deploy minimum1000ATMsayear. Sucha movewill caterto theeveryday cashneeds ofcitizens andcash will continuebeing a primarymode for transacting. Growingcyber-securityconcerns While digital transactionshave been surging, many Indians are still sceptical aboutmaking large value transactions online.This is dueto the rising cyber-attacks and frauds that digital payment modes are exposed to. As opposed to digital payments, cash-based transactions involve only the payer and the receiver; hence, many customers feel it is safer to pay in cash. In a latest report by globally a leading financial technology player, 71% respondents stated that they are concerned about scams and fraudowing to the shift to digital methods ofpayments due to Covid-19. Additionally, digital payment frauds account for abouthalf of all bank fraud casesin India. All these factors establish that even though digital paymentsare on the rise, cash continuesto hold itsthrone. In an economylike ours, we arelikely to continue

  4. witnessing the coexistence of both cash & digital payments. While the acceptance of digital payments will grow at a rapid pace, cash will continue beingthe mostpreferred mode formost Indians inthe near futureas well.

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