India sees more cashless transactions through internet, ATM, etc as consumers favour virtual payment

MUMBAI: Paperless transactions through the internet, ATM, cards and mobile devices have surpassed paper-based ones in the year leading to March 15, reiterating the fact that Indians are moving towards virtual payment.

With the younger generation taking a liking to online or hi-tech methods of fund transfer, rather than filling up reams of paper, the bank cheque may also soon go out of fashion.

While paper-based transactions cleared through cheques amounted to Rs 85 lakh crore in FY15, paperless transactions, including retail electronic transactions such as ECS (electronic clearing system) debits and credits, electronic fund transfer, card transactions, mobile transactions and prepaid instruments were to the tune of Rs 92 lakh crore in the same period, according to RBI data.
These are essentially retail customer transactions. Other interbank and financial market transactions are electronically settled through channels such as RTGS (real time gross settlement), among others. While bill recipients and merchandise vendors are incentivising online transactions by offering cash discounts, banks are discouraging paper-based transactions by restricting supplies of free cheque leaves.

The country’s largest lender State Bank of India has a majority of transactions settled through paperless channels."At SBI, about 69% of daily transactions happen through alternative channels, including internet, ATM and mobile banking. We see it rising every year with more young people becoming our customers,"said Sunil Srivastava, deputy managing director (corporate strategy and new businesses), State Bank of India.

"A majority of the transactions will turn paperless in the next five-10 years although it cannot be fully paperless in India. Online transactions will gain traction once people use more smartphones with better connectivity,"he said.

At an estimated cost of Rs 35,000 crore, the National Optical Fibre Network (NOFN) project plans to connect about 2.5 lakh village panchayats with the internet, which will help online bank transactions as rural India begins to gain access to the net.

"I see the growing debit card numbers, and acceptance along with increase in online ecommerce transactions, highlight the change which is taking place,"said TR Ramachandran, group country manager, India and South Asia.

Mobile wallet transaction is among the fastest growing paperless modes, though settlements through this mode were valued at a miniscule Rs 1 lakh crore in FY15. This is expected to push up money remittances.

Now, the mobile wallet user base is small with only about 10 million customers transacting on wallets, which is expected to grow to 100 million in the next five years.

"Half the transactions through wallets in FY15 were for remittances, and the rest for bill payments, mobile, DTH or direct-to-home recharge and movie or travel ticket purchases,"said Pramod Saxena, CMD, Oxigen Services (India) ( a mobile payment service provider, which has applied for a payment bank licence. Once payment bank licences are announced, paperless transactions will increase manifold with customers using more wallet-based transactions.