100 days after note ban: E-payments off peak

Finance
February 17, 2017
MUMBAI: With currency supply easing 100 days after demonetisation, some customers are returning to cash even as digital transactions begin to drop off from peak levels seen in December 2016. Also, while card acceptance has picked up in several retail outlets, kirana stores and restaurants continue to resist digitisation of payments, according to a survey.

According to SBI chairman Arundhati Bhattacharya, adoption of digital channels has slowed down as the cash situation is normalising. “There has been a fall in digital transactions in recent weeks, but it is higher than what it was pre-demonetisation,” she said. She added that loan demand continued to be low in January following demonetisation, but she expected things to improve by next month.

Latest data from the RBI shows that around Rs 8.5 lakh crore, which is nearly 55% of the Rs 15.5 lakh crore, has been remonetised following withdrawal from banks. Banks expect deposits to stabilise soon, as a large value of transactions have moved to electronic channels.

100 days after note ban: E-payments off peak

According to sources in card companies, the usage of cards for low-value transactions have dropped as people are returning to cash, but debit card transactions continue to be high and are expected to soon overtake credit cards in value.

A survey jointly undertaken by Deloitte and Confederation of Indian Industry shows that there has been a twofold growth in the use of point of sales (PoS) terminals and mobile wallet transactions post-demonetisation.

The survey revealed that petrol pumps recorded 100% acceptance of digital payments. At the other end of the spectrum were grocery and kirana stores, where only 20% and 15% of outlets surveyed accepted card payments. “Merchants, with higher transaction volumes (petrol pumps) or higher transaction values (jewellery stores), are more likely to offer digital payment options to their customers,” the report said.

One of the key challenges of promoting card transactions is that merchants need to record card transactions of Rs 20,000-25,000 to avoid paying monthly commitment charge to their banks. “Assuming that the card volumes, prior to demonetisation, were a conservative 8% of a merchant’s revenue, the minimum commitment volume of Rs 20,000 would require a merchant to achieve a minimum monthly turnover of Rs 1.5 lakh to avoid charges,” the report said.

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