Cash may no longer be king. While you wait for the serpentine queues at ATMs to peter out and currency notes of Rs 100 denomination to become easily accessible again, the adoption of digital payment solutions is picking up at a furious pace.
Everyone from the neighbourhood vegetable vendor to the chai and bhelpuri-wala is embracing digital payment solutions to tide over the cash crunch.
Debit cards, e-wallets and other digital platforms are witnessing a surge in volumes. But are we fully equipped to make the switch to a less-cash society?
ET Wealth conducted an online survey to find out the level of adoption of digital payment solutions and user habits. The findings reveal that while people are getting comfortable with cashless payments, some mindset issues are holding back many from embracing the newer platforms. The findings also suggest that the usage habits of those who have taken to cashless modes could be exposing them to security threats.
EASE OF DIGITAL TRANSACTIONS WINS PEOPLE
The online survey was conducted from 26 to 28 December. Some 663 respondents participated in it. Figures denote % of respondents.
Why would you adopt a cashless payment system?
Most people are switching to digital payments for its sheer convenience
Convenience: 84%
Discounts/cashback rewards: 49%
Easy tracking of spends: 54%
Shortage of currency notes: 34%
What is your biggest concern around cashless payments?
Risk of fraud and lack of merchant acceptance are main concerns.
66% Security (risk of identity theft)
48% Poor Internet connectivity
59% Merchant acceptance
28% Costs
10% Lack of tech knowhow
What has been your preferred mode of payment since 9 November?
Card have been the preferred mode of payment since the demonitsation.
Netbanking: 59%
Credit /debit card: 88%
Cash: 17%
E-wallet/Mobile app: 47%
Cheque: 19%
For high-value transcations, what is your preferred mode of payment?
Consumers seem to prefer Netbanking for high-ticket transactions.
74% Netbanking
54% Credit/Debit card
5% Cash
8% e-wallet/Mobile app
53% Cheque
Would you use cashless payments if notes come back into circulation?
Almost two-third of the respondents are likely to continue with digital payments for most transactions.
For most transactions:65%
For some transactions: 22%
For rare transactions: 10%
Never: 3%
Have you installed antivirus or malware protection on your phone?
Three out of five respondents do not use a security software on their mobile phones.
Yes: 41%
No: 59%
How often do you change device passwords, PIN of debit/credit cards?
One out of every five respondents admit to never changing their security passwords.
35% Once in 6 months
27% Once in a year
17% Every month
21% Never
What can be safely shared when you do cashless transactions?
Several users seem comfortable sharing critical financial details during digital transactions.
Aadhaar: 32%
PAN: 24%
Bank account number: 17%
Credit/Debit card number: 14%
All of these: 10%
None of these: 41%
Do you access public WiFi from phone or laptop?
Three out of 10 respondents say they regularly access unsecure public WiFi.
Yes: 30%
No: 70%
Do you store card details on your phone or laptop?
More than two-third prefer convenience over safety and store financial details on their devices.
Yes: 35%
No: 65%
Convenience over liquidity crunch
The government is going all out to encourage the adoption of digital payment platforms. It initially waived off the service tax on card transactions up to Rs 2,000 and announced discounts on purchase of petrol, diesel and railway tickets, among others, if paid for digitally. It is also pushing for a sharp cut in the transaction charges, levied by banks on merchants, on debt and credit cards.
More recently, the government launched two schemes, Lucky Grahak Yojana and Digi Dhan Vyapari Yojana, offering around Rs 340 crore in cash rewards to encourage digital payments between Rs 50 and Rs 3,000. It is also aggressively pushing UPI (United Payment Interface) and is expected to launch an app that users can download to transact across multiple banks. An upgraded, feature-rich version of the USSD (Unstructured Supplementary Service Data) platform, which allows banking transactions through feature phones without Internet connectivity, is also to be unveiled.
Those without mobile phones can now also transact digitally through Aadhaar based payments using just their fingerprints. E-wallet providers have also jumped at the opportunity. It is raining discounts and cashbacks in this segment, which is attracting more users on these platforms. For instance, Freecharge recently ran a two-day flat 100% cashback campaign on purchases like movie tickets, meals and online shopping. It claims that during this short window more than 3 lakh new wallets were created and volumes rose 15 times.
Others service providers such as Paytm and MobiKwik have also been lining up cashback offers. Banks are not far behind in promoting their debit and credit cards. Nearly nine out of the 10 respondents in our survey have been using debit or credit cards regularly since 9 November—the day after the notes ban was announced. For higher payments, nearly three out of four respondents now prefer Internet banking and more than half use debit or credit cards and also cheques.
However, neither the cash crunch nor the discounts or rewards are the main drivers behind the growing attraction towards digital platforms—as many as 84% of the respondents say they would switch for the sheer convenience afforded by digital payment platforms. Only 34% admitted they were forced to adopt cashless modes due to the ongoing cash crunch. “Even those initially reluctant have started moving towards digital payments,” points out Sony Joy, Cofounder and CEO of Chillr, a multi-bank mobile payments app.
Users are finding it easier to pay for small-ticket items using e-wallets. “The e-wallet platforms are being adopted by the mainstream users for everyday transactions of around Rs 50-Rs 200,” says Sudhanshu Gupta, VP, Paytm. It appears the interest in digital payments is here to stay, with nearly two out of three respondents saying they would continue to use cashless modes for most transactions, even after currency notes are back into circulation.
Which digital payment mode suits you?
Knowing the transaction costs and caps, among other things, can help you decide which digital payment platform to use.
DEBIT / CREDIT CARD
Suitable for: Online/offline merchant sale.
Transaction limit: Set by card issuer
Details required: Card number • CVV • Expiry date
Cost: Debit cards: Up to 0.75% for transactions up to Rs 2,000; up to 1% for transactions above Rs 2,000. Credit cards: around 2.5% per transaction
RTGS / NEFT
Suitable for: High value online transactions.
Transaction limit: No upper limit, minimum Rs 2 lakh. Up to Rs 10 lakh, minimum Rs 1
Details required: Account number • Password • Beneficiary registration • IFSC code
Cost: RTGS: Up to Rs 55 per transaction. NEFT: Up to Rs 25 per transaction.
IMPS
Suitable for:Instant transfer
Transaction limit: Rs 2 lakh per day
Details required: Account number • Password • Beneficiary registration • IFSC code
Cost: Rs 5-15, depending on transaction amount.
UPI
Suitable for: Instant transfer
Transaction limit: Rs 1 lakh
Details required: VPA (virtual payment ID) of recipient, m-Pin
Cost: Less than 50 paise per transaction.
USSD
Suitable for: Feature phones without Internet connectivity
Transaction limit: Rs 5,000
Details required: Only Aadhaar number, IFSC or code allotted by banks on registration
Cost: As levied by the telecom operator.
E-WALLET
Suitable for: Small-ticket transactions.
Transaction limit: Rs 20,000 per month (Rs 1 lakh for KYC-compliant wallet holders)
Details required: Login ID
Cost: Only if you transfer money from your wallet into your bank account.
RTGS: Real-time gross settlement systems. NEFT: National Electronic Funds Transfer. IMPS: Immediate Payment Service. UPI: Unified Payment Interface. USSD: Unstructured Supplementary Service Data
Limitations aplenty
Even as people adapt to newer, digital modes of payment, questions remain over the platform’s operational aspects. The surge in digital payments that followed the notes ban has clearly overwhelmed the existing infrastructure. “As a nation, we are clearly behind on the preparedness to deal with this largescale move towards digital payments,” admits Joy.
There have been numerous reports of card transactions on PoS terminals not going through owing to connectivity or server issues. E-wallet transactions have also not been smooth, with some customers complaining their wallet balance did not reflect the correct amount transacted. “Issues with network congestion and Internet connectivity have led to some delays in transactions going through and reflecting in the users’ wallet balance,” admits Gupta, explaining that the problem is a result of the sharp spike in transactions.
He assures users that there is nothing to be concerned about. “Digital payments are completely traceable and can be reconciled. Your money is safe and not going anywhere,” he says. E-wallet platforms are constantly upgrading their systems to cope with the increased traffic. “Physical infrastructure supporting the digital payments needs to revisited and scaled up to cater to the next level of usage,” says Mohan Jayaraman, Managing Director, Experian Credit Bureau, India. Merchant acceptance of digital payment platforms also remains a sore point. Shailaz Nag, COO, PayU India, says that both existing users and those yet to take to digital platforms remain confused with the different options available such as PoS terminal, ewallet, IMPS (Immediate Payment Service) etc.
Merchants are also not fully aware of the policies and regulations around accepting digital payments. This confusion exists among end users as well, who have to contend with different experiences across platforms. “The user experience across these digital platforms is not similar,” says Nag, pointing out how even among banks, different authentication systems exist—a combination of ATM PIN, password, One-Time Password (OTP), security questions etc.
Security issues
Concerns around the security of transactions and identity theft still prevent thousands from moving over to the digital payment platforms. Some 66% of the respondents in our survey said that security concerns remain their biggest worry. A cultural and mindset change is required to bring people on board and make them feel comfortable with digital payments, argues K.V. Karthik, Partner, Financial Advisory, Deloitte.
Experts insist digital payments platforms are fully secure provided the necessary precautions are taken by the user. “Cash can get stolen and you will have to bear the loss. However, if there is a fraud related to your debit/credit card then you have a recourse. As per regulatory guidelines, the banks will investigate the case when you report a fraud and you will get compensated in case it's not because of lapses on your part,” points out Karthik. Most popular e-wallet platforms also comply with the latest security specifications and have added further layers of security, say experts.
However, the existing machinery for protection of consumers requires a huge revamp before consumers become comfortable with digital payments, says Jayaraman. “As more and more digital transactions move into the yet unregulated fintech space, proper fraud prevention, including device fingerprinting and consumer protection mechanisms, needs to be put in place. There is a definite need to improve the quality of the safeguards,” he says.
However, service providers are taking steps for added protection. Freecharge, for instance, recently launched an e-wallet protection plan (at no added cost) for all its users, where the underlying wallet balance of all the customers will be insured up to a limit of Rs 20,000, as long as the user is transacting at least once a month. Other e-wallet platforms are also expected to follow suit.
Change in habits a must
What is clear is that users’ habits related to online transactions and usage needs to undergo a drastic change. “This is a newer way to transact and it will involve a learning curve,” insists Gupta. At the very outset, Karthik warns users not to reveal too many details on social media. “Nowadays users put up many personal details in the public domain through social networking platforms. If the profile is so widely available, it is not difficult for fraudsters to use it to their advantage,” he warns.
Nag firmly believes the smartphone will increasingly become the hub for making payments, but users need to take necessary precautions—keep the Bluetooth switched off, install antivirus software on the smartphone and not download suspicious files from the Internet. “Most people today use antivirus software on their desktop computer or laptop, but ignore the smartphone. It is critical that the smartphone is also secured properly,” says Nag.
Three out of five respondents in our survey admitted to not having installed an antivirus software on their smartphone. Even if your eWallet app is secure and trusted, you must be careful about other apps on the smartphone, which can potentially capture keystrokes or passwords being used for transactions. Most apps nowadays seek access to personal info stored on the smartphone including documents, media files, contacts, etc.
Users must be cautious when it comes to allowing access to information demanded by these apps. “Be wary of using apps asking for access to information that’s not a must for the app to function,” urges Karthik. This is where prominent anti-virus and anti-malware software can come to the rescue. They scan the installed apps and flag potential risks, in case of apps asking for unnecessary permissions. Storing critical details on personal devices is another worrying habit.
For instance, one-third of the respondents admitted to allowing their smartphone or personal computer to store their billing or card details for easier future transactions. While this surely facilitates quicker payments, it leaves you vulnerable to hackers and identity thieves. “Habits like writing down the PIN on the back of the debit or ATM card or sharing details over the phone is like presenting someone with a blank cheque,” warns Joy.
Similarly, you could expose yourself to risks, if you regularly access public WiFi through your smartphone or laptop. Three out of 10 respondents in our survey admitted to doing so at every opportunity. With all the financial information stored in the phone, losing or misplacing it is almost like losing your wallet. To ensure your critical data is secure, even when your phone is unattended or lost, the least you can do is enable the phone screen lock. You can further enhance the security by installing an app lock to protect apps with sensitive data.
