Demonetisation has boosted digital payments, says Freecharge's Govind Rajan

While announcing demonetisation of Rs 500 and Rs 1,000 notes last week, Prime Minister Narendra Modi stated how the cash economy of India has been fuelling the growth of black money and corruption. And while it has been causing a lot of inconvenience to citizens, the move seems to have boosted digital modes of payments in India, says Govind Rajan, CEO, FreeCharge, who dropped by Firstpost on Wednesday to discuss how the demonetisation move has impacted the traditional, cash-based transaction system. Rajan, who joined FreeCharge in 2015 tells us that Modi’s announcement on demonetisation has given digital payments a huge boost, adding that the move to digital payments is good for everyone, especially customers. The main advantage, in his view, is a more efficient economy. Yes, the announcement did cause great inconvenience to a large number of people, but he’s happy that it’s also shifted the focus to a more secure payment platform.

Speaking of FreeCharge, an e-commerce website and digital wallet service all rolled into one, Rajan says that the number of transactions on their platform has gone up by 10 times. “What we’re actually seeing is that the average value of the transaction is coming down. Customers are making smaller purchases, which is reflective of a daily purchase habit,” says Rajan. Originally starting out as a quick means of recharging essential services, FreeCharge has since moved on to support electronic payments both online and offline. FreeCharge was acquired by Snapdeal in 2015. FreeCharge isn’t the only player in this and it’s far from being the largest one. At last count, rival digital wallet service and e-commerce platform, PayTM, claimed 75 million daily transactions to FreeCharge’s 7 million. Trust and inertia Rajan places special emphasis on the word “inertia” when describing digital wallets. He believes that customers and merchants are only sticking to cash-based transactions because they’re comfortable with it. He says that people have been using cash for so long that they’ve built up a level of trust and comfort with it. That whole experience of feeling the cash come and go feels more familiar than the relatively detached, virtual world of digital wallets. In his own words, for some, “the transition is as drastic as switching from only oiling your hair to only shampooing it,” he says. You’re essentially doing the same thing, taking care of your hair, but the method is different. There’s a perceived security to the familiar. “Not carrying cash on your person is in itself a big advantage in terms of security. Digital transactions are traceable and fraudulent transactions can’t be reversed. This is not possible with a cash transaction,” says Rajan. On security Digital transactions are inherently more secure because they use modern technology, says Rajan. FreeCharge alone performs over 500 security checks on every transaction. If there’s even one red flag, the transaction is cancelled. As an example, Rajan says that FreeCharge has a list of bank IFSC codes that are responsible for a lot of fraud and the company can simply blacklist those codes. You can’t do this with real cash. Wallets store notes and these notes have some value, digital wallets do the same, except that the notes are virtual. You can also reverse digital transactions, track locations to prevent fraud and so much more. The RBI also has very strict guidelines in place and “the same mechanisms that authorise the cash in your wallet are behind digital wallets anyway,” he says. While digital transactions are inherently more secure than cash transactions, they’re not perfect. The recent data breach, which compromised over 32 lakh debit cards is scary and unless digital wallet services follow stringent security protocols, there’s nothing stopping such a breach from happening again. When asked about his thoughts on this, Rajan admitted that security was always a concern. However, he’s quick to point out that “the incidence of such fraud in India is half of what it is in the US and other western, developed countries.” He attributes at least part of this to the higher security standards, like two-step authentication, that’s been mandated by the RBI. “There is a sense of fear, but people will overcome that once they experience the comfort and reliability of a digital transaction,” he adds. “These fears, part of them are rational, but part of them are because of inertia when you move from one product to the other.” Rajan had a great deal more to say on Snapdeal’s acquisition of FreeCharge last year, the importance of design and the payment structure in the country. To learn about all this and more, watch the interview embedded above.