It was not long back when the Ex-Finance Minister P Chidambaram made a statement on parliament mocking the Digital India initiative. He raised questions on how digital payments will reach far-flung villages and among street vendors. That they don’t have any POS machines or card readers. Neither do they have internet across the country to pick up digital transactions. How will some pay 7 Rupees and 50 Paise digitally to a street vendor for buying tomatoes. While he had a point, it lacked vision.
Until 2016, digital payments weren’t common
Prior to demonitization, the concept of cashless transactions weren’t popular except for big restaurants, hyper-markets and among brand chains. Card transactions were the only known form of digital payments across the world. ATM used to be the most popular spot for public who hated visiting banks, to get cash. Everyone had some amount of cash with them to meet daily expenses and routines. There were times when small vendors with POS machines offered ‘swipe for cash deals’ for their customers where people who were in need of cash can swipe their card to get an equivalent amount of cash from the vendor for a small cost. Cash was king.
Then came the Unified Payment Interface
UPI, commonly expanded as Unified Payments Interface, an initiative by Indian government’s National Payments Corporation of India, is an instant payment system as well as protocol that allows direct bank-to-bank funds transfer without the need for POS machines or account numbers of beneficiaries. This was introduced in 2016 synchronizing with the great demonitization. UPI enabled all smart phone users to make transactions just by scanning the beneficiary’s QR code. This meant that there wasn’t a need to know any of the bank details of beneficiary. Just the phone number linked to bank account was enough to make money transfers. This became a huge hit as it made transactions a lot more easier and cashless. The need for cash begun to reduce. But for UPI to succeed, bank accounts for all citizens were a necessity. There were millions of citizens who had no bank accounts.
Jan Dhan added power to UPI
The Indian government realizing the need for bank accounts to enable digital payments and cashless economy, rolled out a mega scheme to create bank accounts for all the citizens in the country. India is the most populous country as on date with its population going beyond 130 crores, i.e. 1300+ Million. As on date, this scheme has ensured creation of bank accounts with zero balance facility for more than 500 Million citizens. The internet revolution introduced by Jio gave free internet to all its mobile users for a year or two thereby enabling and encouraging the masses to buy smart phone. Once there was internet and bank accounts linked phone numbers across the country, UPI started reaching the masses, to the villages and to the remotest parts of the country. Soon, every street vendor started accepting UPI payments, including the vegetable vendor in the remote locations to receive a payment of as low as Rs. 7. 50 for tomatoes. Now that is real revolution.
Why should countries move towards Digital Economy
Cash always had its share of corruption issues and accountability problems. Being a physical entity means it could be stashed, controlled and released when needed to circulate it in any market and to countries that had ill-intentions. Cash also was an enabler in making outlaws rich through unlawful means such as tax evasions, lowering the goods value and illegal imports. Digitization could bring in substantial accountability. This increased loss to ex-chequer and a big dent on country’s economic progress.
India sets the standard for the western nations
Today, India is leading the cashless revolution and is one of the largest economy in the world that has gone digital setting an example and standard for the rest of the world. While the West is still in the clutches of cards and POS machines, India is teaching the entire world on how to go cashless with just their smart phones.
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