By Hemant Joshi
RBI and the commercial banks in India spend about Rs 21,000 crore every year as operational cost and citizens of Delhi spend approximately Rs 9.1 crore and 6 million hours in collecting cash. This love of cash costs a fortune to the country every year and have made India one of the most cash-intensive economies with cash-to-GDP ratio of 12% as compared to Brazil with just 3.93%.
The growing adoption of smartphones and evolving communication technologies has opened an array of opportunities for all players in the ecosystem. Though m-banking and mobile payment services are still in their nascent stage, the evolving e-commerce sector, hassle free payment options and ease of using apps have brought many potential customers to the payment industry. As per the Global Mobile Consumer Survey done by Deloitte in India, 71% of those surveyed are interested to use the in-store mobile payment facility while 54% are interested in mobile money transfers.
Jan Dhan Yojna, a financial inclusion initiative of the government opened 203 million new accounts for rural people with deposits of Rs 30,640 crore. Incentivizing the mobile payment industry would help in achieving the financial inclusion objective of the government.
Tax incentives: The government’s proposal to offer sales tax rebates of 1 to 2 percentage points to merchants who report at least half of their transactions through online payments, is a positive move for the payments sector. The mobile payment companies take 2.5% from the merchant which is much lower in comparison to online market places and aggregator services who keep 5-20%. Tax rebates can be extended to merchants for accepting electronic payments while income tax benefits for the consumers will see more use of electronic transfer.
Remove transaction fees for low-value transactions: Banks charge the merchants for card based transaction a fee of 0.75% for transactions up to Rs 2,000, and maximum of 1% for transactions over Rs 2,000. The merchant, in turn, passes on the transaction fee to customers. Removing the transaction fee on low amounts and reducing it on high amount transactions can boost online payments.
Removing the USSD charges: The operators levy Rs 1.5 per transaction made on the mobile phone which could be removed to encourage mobile payments.
Add convenience and safety: To make the mobile payment successful, government needs to set-up electronic transaction points in rural areas. Post offices and gram panchayats may serve as electronic money transfer and collection points with minimal or zero transaction fee. In addition, by providing simple apps in local languages for utility bill payments and discounts on online payment of bills could encourage the customers.
The customer should be made aware of hassle free and safe booking/payment of LPG and other utility bills and reimbursement of subsidy via mobile. Rural people can save overhead payments made to local service providers who provide safe pickup and doorstep delivery of the cash.
The long term challenge of cleaning black money in India can be addressed by implementation of this technology, which facilitate cashless transactions. Incentivising the mobile payment sector will be a big boost in that direction.
The author is a partner at Deloitte Haskins & Sells LLP, and his views are personal