However, the digital payments ecosystem needs support for increasing its reach and usage. A specific support area would be Point of Sale (POS) machines, which is perhaps the biggest channel today, to compete against cash transactions.
Currently there are only about 30 lakh POS devices undertaking close to 39 crores of transactions every month. We need to multiply the number of POS devices to achieve the scale that our country needs. However, there has been a gradual decrease in merchant discount rate (MDRs) in recent times. Some budgetary incentive in this space would go a long way in promoting cashless transactions.
At the same time, the Unified Payments Interface (UPI) system could emerge as a cheaper and more scalable alternative to POS machines, because of the rising penetration of smartphones and internet connectivity. Budget 2018 can possibly provide the much needed incentives such as cashbacks for both customers and merchants.
The advent of paperless processes is going to be another key driver. Technologies such as e-KYC, e-Sign and e-Nach will make it possible to reach millions who do not have easy access to banking. To reap the full benefits of such technology, more players need to be encouraged to adopt these services, which currently come with a high entry barrier in terms of set-up investment and cost of compliance. This area is expected to receive its due share of incentives, probably through ways such as subsidies or lower duties on critical equipment and devices.
(Rajashree Nambiar is CEO, India Infoline Finance Ltd.)
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