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How Digital Payment Technologies Are Replacing Cash in India By adopting cashless methods, people do away with need to carry around bulky banknotes and hence the new technology is bound to take over

By Vivek Kumar Singh

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Post the abrupt implementation of Demonetization, the use of digital payment methods in India received a major boost. According to the National Payments Corporation of India (NPCI), BHIM Unified Payments Interface (UPI) transactions touched INR 1 trillion in value and 913 million in volume, up from a paltry 7 million volume in April 2017. One would imagine, then, that the increased use of digital payment methods has led to a decrease in the use of cash.

However, this isn't the case. According to data from the RBI, the total currency in circulation stood at INR 18.13 trillion on March 9, 2018 which was significantly higher than the INR 17.97 trillion on November 8. Simply put, cash as a payment instrument is still dominating the payment space, and digital payment usage is still limited to a small, largely urban and technologically enabled audience. Delving deeper into the payment practices and infrastructures in the country, one can clearly see that there is an overall technological disconnect that is ensuring that cash remains king.

Why digital payments – its benefits over cash

But why should that matter? In the discussion that followed the implementation of demonetisation, the government said that encouraging digital payments was one of the motivations behind the policy. The government built better digital infrastructure and promoted the penetration of mobile wallets along with secure Aadhaar-linked payment systems to provide a seamless payment process. Why should Indians be encouraged to adopt digital payment systems? It did so because digital payment systems are easier to regulate and monitor, allowing the government to better prevent fraud, money hoarding, and tax evasion.

End-consumers also benefit in getting rid of their reliance on cash. By adopting cashless methods, people do away with need to carry around bulky banknotes or plastic cards. What's more amazing is that they do not even need to be physically present while making payments! Extreme convenience has indubitably appeared as the foremost benefit of digital payment methods. These payment methods are also more reliable than cash transactions as all digitally carried out transactions are duly recorded and these records can accessed to be used as proof of payment. By allowing people to track spends, digital payment methods not only help while budgeting but also while calculating income tax payments. If under scrutiny, these records can help people explain their savings and spends.

Digital methods of payment also offer security by doing away with predicaments such as lost cash or misplaced cards. Security measures such as biometric IDs and two-factor authentication give customers a sense of safety while using these methods. Minor cash glitches such lack of exact change with shopkeepers can also be permanently resolved with the advent of digital payments where you can pay the exact amount to the very last Paisa.

However, even with the aforementioned advantages in place, cash is still the most predominant method of payment in India. For all their benefits, digital payments have continued to be elusive and inaccessible for a substantial majority of Indians.

Current pitfalls in digital payments – Why cash is still dominant in India

Even though payments through digital methods such as wallets and UPI are convenient, they remain inherently exclusionary as they are majorly based on internet connections, QR codes, RFID and similar hardware and software that is complex to operate and expensive to own.

According to available industry figures, India is home to 800 million mobile phone users, of which only around 200 million use smartphones, leaving 600 million cellphone users without the ability to use the internet or QR codes for payment. Of these, a mere 6 million phones are NFC-enabled. The fact that all sections of society do not have access to pre-existing digital payment methods acts as a huge disconnect in the digital payments landscape. Owing to this gaping chasm in the digital payment system, a lot of people have been unable to adopt these otherwise cutting-edge methods of payment.

Further, even after putting complex security procedures in place, digital wallet scams are common due to a lack of familiarity with these digital systems, and Indians are thereby reluctant to completely trust these methods. With security concerns on the rise, the need for a more reliable system of payment is apparent.

To create a high-functioning, productive cashless economy, there exists a need for a method that is as interoperable as cash and as convenient as cashless methods.

Sound-Wave technology to fill digital payment gaps

Soundwave-based payment systems can bridge the gaps that currently exist in the digital payment world. Soundwave technology merges the advantages of digital methods and those of cash to create a uniquely interoperable payment system. Such a system does not rely on complex hardware similar to pre-existing methods. In fact, it can be integrated with basic phones that do not support data connections.

Sound-based payment services, use sound waves to enable payments on any device, independent of the instrument or infrastructure, providing the interoperability of cash along with the ease-of-use of digital payment systems. It thus enables contactless payments and communication between mobile phones, leading to convenient transactions with no added costs or high initial expenditure for the consumer or merchant.

Addressing the need for added security, new-age sound-based proximity communications and payment service companies have integrated Blockchain to create a secure and accessible payment system.

Soundwave technology, with its maximum convenience and seamless interoperability, can slowly but surely, take over the use of cash in India. When everyone from a huge retail store manager to a local mom-and-pop store owner, pay using sound-wave technology, India will truly become a trailblazing, cashless economy.

Vivek Kumar Singh

Co-founder, ToneTag

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