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A Study and Analysis On The Usage of Digital Payment
A Study and Analysis On The Usage of Digital Payment
A Project Submitted to
BY
SHRUTI S. KARANGUTKAR
SATHAYE COLLEGE
MUMBAI-400057.
MARCH 2021-2022
I
Declaration by learner
I, the undersigned, Ms. Shruti S. Karangutkar hereby, declare that the work
embodied in this project work titled “A STUDY AND ANALYSIS ON THE
USAGE OF DIGITAL PAYMENT.”, forms my own contribution to the research
work and analysis carried out under the guidance of Ms. Sadaf Hashmi is a result
of my own research work and has not been previously submitted to any other.
Wherever reference has been made to previous works of others, it has been clearly
indicated as such and included in the bibliography.
I, hereby further declare that all information of this document has been obtained and
presented in accordance with academic rules and ethical conduct.
Shruti S.
Karangutkar
(Name and Signature of the learner)
II
Certificate
This is to certify that Ms. Shruti S. Karangutkar has worked and duly
completed her Project Work for the degree of Bachelor in Commerce
(Accounting & Finance) under the Faculty of Commerce in the subject
of Accounting & Finance, and his project is entitled, “A study and
analysis on the usage of digital payment.”, under my supervision.
I further certify that the entire work has been done by the learner under
my guidance and that no part of it has been submitted previously for
any Degree or Diploma of any University.
It is her own work and facts reported by her personal findings and
investigations.
___________________ ______________________
Ms. Manjiri Bhosle Principal – Dr. Madhav Rajwade
Course Coordinator Sathaye College
III
COLLEGE SEAL
____________________
Ms. Sadaf Hashmi External Examiner
Project Guide
Date of submission:
IV
Acknowledgments
To list who all have helped me is difficult because they are so numerous and the depth
is so enormous.
I would like to acknowledge the following as being idealistic channels and fresh
dimensions in the completion of this project.
I take this opportunity to thank the University of Mumbai for giving me chance to
do this project.
I would like to thank my Principal, Dr. Madhav Rajwade for providing the
necessary facilities required for completion of this project.
I take this opportunity to thank our Coordinator, Ms. Manjiri Bhosle for her moral
support and guidance.
I would also like to express my sincere gratitude towards my project guide, Ms.
Sadaf Hashmi whose guidance and care made the project successful.
I would like to thank my college library, for having provided various reference books
and magazines related to my project.
Lastly, I would like to thank each and every person who directly or indirectly
helped me in the completion of the project especially my parents and peers who
supported me throughout my project.
V
ABSTRACT
Keywords:
VI
TABLE OF CONTENTS
SR.NO. PAGE
CONTENTS NO.
CHAPTER 1: INTRODUCTION
VII
CHAPTER 2: RESEARCH METHODOLOGY
2.1 Introduction 21
2.2 Objectives 22
2.3 Hypotheses 23
3.1 Introduction 27
VIII
CHAPTER 5: FINDINGS AND CONCLUSIONS
5.2 Conclusions 57
Annexures 66-67
IX
CHAPTER 1: INTRODUCTION
OPERATIONAL DEFINITIONS
1
and POS software to create a POS machine for processing a transaction
and payment.
2
of India (NPCI) was established in 2008–has been spearheading the
development of the retail payments system. Important milestones
attained in this overall process of development of the payments system
include the introduction of MICR clearing in the early 1980s, Electronic
Clearing Service and Electronic
Funds Transfer in the 1990s, issuance of credit and debit cards by banks
in the 1990s, the National Financial Switch in 2003 that brought about
interconnectivity of ATMs across the country, the RTGS and NEFT in
2004, the Cheque Truncation System (CTS) in 2008, the second factor
authentication for the ‘card not present’ transaction in 2009and the new
RTGS with enhanced features in 2013. Furthermore, non-bank entities
have been introduced in the issuance of pre-paid instruments (PPI),
including mobile and digital wallets. These measures have been
complemented by significant initiatives by the NPCI including the
launching of grid-wise operations of CTS, interoperability on NACH,
IMPS, NFS, RuPay (a domestic card payment network), APBS and
AEPS (which are an important part of the financial inclusion process),
National Unified USSD Platform (NUUP), UPI and the BHIM
application. Many of these achievements, particularly given their pan-
India coverage, are indeed notable from across country perspective,
including the ‘T or
3
1.2 MODES OF DIGITAL PAYMENTS:
1. Bank Cards: Bank cards are among the most used type of cashless
2. Mobile wallets: A mobile wallet is like a virtual wallet where all your
banking details are saved in a mobile App. This wallet saves you from
the hassle of remembering CVV or 4digit pins of the banking cards.
All your details are securely saved in the mobile wallet. Many banks
provide their mobile wallet Apps which can be easily downloaded.
Also, there are some private mobile wallet apps, such as Paytm,
Freecharge, Mobikwik, etc. You can add or send money or purchase
goods through a mobile wallet App.
any customer with a bank account can use with the help of a UPI-
based App. You can link more than one bank account with the UPI
mobile App on their smartphone and initiate fund transfer seamlessly.
The best benefit of UPI is that there is no use of bank account number
of IFSC code to initiate fund transfer through UPI. The only required
thing is Virtual Payment Address (VPA).There are a number of UPI
Apps both for Android and iOS platforms that you can use. To use
4
the UPI service, you must have a valid bank account and registered
mobile number with the bank. Another benefit of UPI is that there are
no charges for UPI transactions. You can send and receive money
through UPI. Also, UPI id and password can be easily recovered if
you misplace them.
5
other banks. Upon registration, both the individuals are issued an
MMID (Mobile Money Identifier) Code from their respective banks.
This is a 7 digit numeric code. To initiate the transaction, the sender
in his mobile banking application need to enter the registered mobile
number of the receiver, MMID of the receiver and amount to be
transferred. Upon successful transaction, the money gets credited in
the account of the receiver instantly. This facility is available 24X7
and can be used through mobile banking application. Some banks
have also started providing this service through internet banking
profile of their customers.
6. Bank payments: This is a system that does not involve any sort of
6
1.3 THE PROCESS OF DIGITALISATION OF TRANSACTIONS:
A MODEL
Infrastructure:
Access to high-speed internet and wide mobile network coverage are the
pillars of the digitalisation infrastructure. The ability to cater to these
infrastructural needs, in turn, relies on the level of electrification and
geographical accessibility made possible by well-developed transport
systems. A thriving network of financial institutions that reaches all
corners of the nation—especially a high penetration of banks— increases
the prospects of universal financial inclusion, providing an opportunity
for many to engage in cashless transactions.
7
the ability rather than the willingness of a consumer to adopt digital
transactions. The financial wherewithal and credit worthiness of
merchants affect their ability to provide digital payment solutions and,
in turn, the expansion and coverage of acceptance infrastructure for
7cashless payments.
Institutional environment:
In the current scenario, the benchmarks for the parameters that determine
ease of doing business are decided by the progress made in the digital
8
paradigm. Digital technology can transform procedures involved in
starting a business, including registration requirements, acquisition of
licenses and permits, obtaining electricity and other utility connections,
and payment of taxes. This elevates the transparency, and time- and cost-
effectiveness of business regulations to a new level. The digitalisation of
the business environment influences the uptake of digital methods in
business transactions.
Stage I. Inception:
Countries in which cash accounts for more than 90 percent of the volume
of consumer payments are in the first stage of the digitalisation process.
These economies are remarkably distant from the benchmark vis-à-vis
the structural parameters earlier described. Progress for these countries
9
entails taking stock of these deficiencies and developing a
comprehensive strategy to overcome them.
Countries such as Kenya, Russia, Columbia and Saudi Arabia are in the inception
stage.
India belongs to this category as well, with 96 percent of all transactions being
cash based.
In this phase, countries that have matured into robust and well-developed
economies are in the process of reaping the benefits of investing, over a
long period, in the structural evolution of their economies. These
countries have successfully reduced the use of cash to around 50-70
percent of the volume of consumer transactions. Some of the countries
that are in this stage are the United States, Germany, Japan and Korea.
Nations which have reached this stage have leveraged almost all
opportunities of going cashless. Less than 50 percent of the volume of
consumer transactions use cash. Any further increment in cashless
transactions would require disrupting the status quo through innovation.
10
Countries that are nearly cashless include Sweden, Canada, France and
Belgium.
The next part of this analysis views the data on total cashless transactions
as a time-series process. The process is decomposed to isolate the long-
term trend of cashless transactions by eliminating seasonal components
and random influences. The trend for individual components is also
determined to assess their contribution to the movement of the aggregate
11
figure. Since the methodology used in this exercise does not estimate the
trend for the first six and the last six observations, the trend is calculated
from October 2013 to April 2016.
12
consumer is not required to have a bank account to initiate such transfers.
It is also an economical transfer option. For their part, Mwallets have
been increasingly used for mobile recharges and making utility bill
payments. Apart from these primary use-cases, m-wallets have
integrated with ecommerce websites and taxi aggregators to facilitate
easy and convenient payment experience. These wallets are also being
used to make online bookings for movie as well as railway and flight
tickets. A significant share of the success enjoyed by these wallets owes
to the cashbacks, discounts and deals being offered by them to lure
customers; to the extent that it is questioned whether this usage will 85
continue without such incentives being offered. The offering of Value
Added Services (VAS) mentioned earlier has also played a compelling
role in the uptake of mobile wallets in India.
13
percent discount of the sale price on purchases of petrol and diesel; 0.5
percent discount on purchase of railway monthly or seasonal tickets; five
percent discount on payments of services such as catering,
accommodation, retiring rooms offered by the railways; and 10 percent
discount on the payment of toll at Toll Plazas on National Highways.
The following are some of the measures that were launched to subsidise
the costs associated with cashless transactions: Public sector
undertakings were instructed to bear the transaction fee or Merchant
Discount Rate (MDR) associated with digital means that would
otherwise be borne by consumers. In order to reduce the costs of POS
devices, such devices and all components needed to manufacture these
devices were exempted from central excise duty. The central
government, through National Bank of Agriculture and Rural
Development (NABARD) provided financial assistance to banks for
installing POS devices in rural areas. Digital transactions up to INR
2,000 were exempted from service tax. Banks were asked to waive off
any charges on transactions up to INR 1,000 through IMPS,
Unstructured Supplementary Service Data (USSD) – used for
GSMenabled mobile phones, and UPI. Upper limits on the MDR on card
transactions were also announced to encourage acceptance of cards at
merchant outlets.
14
The government also launched lottery schemes such as the Lucky
Grahak Yojana and the Digi-Dhan Yojana to encourage the uptake of
digital payments. The Digi-Dhan Mela, a first of its kind consumer fair,
was organised to create awareness about the merits of cashless
transactions and to educate the masses on how to use noncash
instruments such as plastic money and mobile payments to conduct daily
transactions.
The following are some of the measures that were launched to subsidise
the costs associated with cashless transactions: Public sector
undertakings were instructed to bear the transaction fee or Merchant
Discount Rate (MDR) associated with digital means that would
otherwise be borne by consumers. In order to reduce the costs of POS
devices, such devices and all components needed to manufacture these
devices were exempted from central excise duty. The central
government, through National Bank of Agriculture and Rural
Development (NABARD) provided financial assistance to banks for
installing POS devices in rural areas. Digital transactions up to INR
2,000 were exempted from service tax. Banks were asked to waive off
any charges on transactions up to INR 1,000 through IMPS,
Unstructured Supplementary Service Data (USSD) – used for
GSMenabled mobile phones, and UPI. Upper limits on the MDR on card
transactions were also announced to encourage acceptance of cards at
merchant outlets.
15
cash transactions. They were also requested to not levy charges on
merchants and consumers for debit card, USSD and UPI transactions.
The government also launched lottery schemes such as the Lucky
Grahak Yojana and the Digi-Dhan Yojana to encourage the uptake of
digital payments. The Digi-Dhan Mela, a first of its kind consumer fair,
was organised to create awareness about the merits of cashless
transactions and to educate the masses on how to use noncash
instruments such as plastic money and mobile payments to conduct daily
transactions.
The data on total cashless transactions for the period from April 2013 to
December 2017 exhibits a decisive upward shift in December 2016, the
month immediately after demonetisation was announced. This upward
shift represents the disruption that occurred post-demonetisation in the
trajectory followed by cashless transactions pre-demonetisation. With
about 86 percent of cash in circulation no longer regarded as legal tender,
citizens were compelled to search for alternatives. However, the uptake of
digital means that occurred in these circumstances could well be a
temporary reaction to a temporary phenomenon. If the upward spike is
purely due to demonetisation, its reversal may have been expected after
March 2017, when all restrictions on cash withdrawals and transactions
were lifted. Figure 2 indicates a partial reversal, while the trajectory of
cashless transactions absorbed a part of the upward shift observed in
December 2016.
The following are the payment mechanisms that have absorbed the shift
in their behaviour. The major sources of the spike in cashless
transactions in December 2016 were NEFT (10 percent), NACH (11
percent), M-Wallets (17 percent), and debit card transactions at POS
16
terminals (40 percent). Figures 3and 4 reveal that the behaviour of
transactions made using NACH and NEFT immediately recovered from
the disruption in December 2016 to revert to the trajectory followed
before demonetisation. It is evident from figures 5 and 6 that trajectories
followed by transactions using debit card at POS terminals and MWallets
have retained the impact of the upward shift. These findings are
consistent with the fact that incentives and subsidies to boost digital
transactions under the ‘Cashless India’ campaign were mostly directed
at mobile wallets and debit card transactions at POS terminals.
Launched in April 2016, the UPI has become popular for its convenience
and speed of transactions. UPI transactions have registered an increase
in every month post-demonetisation. However, since September 2017,
the rate of increase has been phenomenal and UPI has been one of the
largest contributors to increases in cashless transactions.
Easy and convenient: Digital payments are easy and convenient. You
do not need to take loads of cash with you. All you need is your mobile
phone or Aadhar number or a card to pay. UPI apps and E-Wallets made
digital payments easier. Pay or send money from anywhere: With digital
17
payment modes, you can pay from anywhere anytime. Suppose your
close friend’s mother fell ill at night. He called you at midnight and asked
some money. Don’t worry, you can send money to your friend using
digital payment modes such as UPI apps, USSD or E-Wallets.
Less Risk: Digital payments have less risk if you use them wisely. If you
lose your mobile phone or debit/credit card or Aadhar card you don’t
have to worry a lot. No one can use your money without MPIN, PIN or
your fingerprint in the case of Aadhar. But it is advised that you should
get your card blocked if you lost it. Also call the helpline of your E-
18
wallet to suspend the wallet account to prevent anyone from using your
wallet money.
As we step into 2022, here are some key trends to watch out for, in the digital
payments industry.
1. Wallets: Wallets have been the poster child for India’s post
demonetization phase. Their ubiquity, simplicity and low cost of
adoption have differentiated them from other forms of digital payments.
19
that tokenize account credentials and provide a secure and seamless
payment experience.
2. POS: 2022 will witness big tech players such as Google, Paytm,
Reliance Jio and WhatsApp stepping in to expand their digital payment
acceptance network. As digital consumers shift between channels, the
lines between offline and online experiences and players will blur, driven
by intuitive UIs and seamless payments. Big tech propelled POS as the
new OS in 2019.
20
in 2012-13. The percentage of the digital payments through other modes
is also increasing in a significant speed. There are many factors which
are affecting the future of digital payments.
Data Source :
http://niti.gov.in/writereaddata/files/document_publication/DigitalPayme
ntBook.pdf
It’s also a safer and easier spending option when you are travelling. ―The
benefits are enormous if you leave out the low-income group, which will
face a huge challenge. Discounts: The recent waiver of service tax on card
transactions up to Rs 2,000 is one of the incentives provided by the
government to promote digital transactions. This has been followed by a
series of cuts and freebies.
21
It’s a good time to increase your savings if you take advantage of these.
For instance, 0.75% discount on digital purchase of fuel means that the
petrol price in Delhi at Rs 63.47 per litre can be brought down to Rs
62.99 with digital payment. Similarly, saving on rail tickets, highway
toll, or purchase of insurance can help cut your costs. Add to these the
cashback offers and discounts offered by mobile wallets like Paytm, as
well as the reward points and loyalty benefits on existing credit and store
cards, and it could help improve your cash flow marginally. Tracking
spends: If all transactions are on record, it will be very easy for people
to keep track of their spending. It will also help while filing income tax
returns and, in case of a scrutiny, people will find it easy to explain their
spending. The written record will help you keep tabs on your spending
and this will result in better budgeting. ―Various apps and tools will
help people analyse their spending patterns and throw up good insights
over a couple of years. Controlled spending could also result in higher
investing. If the same amount of cash does not flow back into circulation
and people continue to use mobile wallets and cards, it is also likely to
bring down the latte factor. This means that the Rs 10 you spent on candy
or chips, or that regular cup of coffee is likely to take a hit since you will
be short of loose change and smaller currency notes. There’s a lesser
chance of budgetary leaks and unaccounted for spends sneaking into
your budget at the end of the month. The government's demonetization
move, and the subsequent cash crunch, has led to a surge in digital
payments. According to the government data, the number of daily
transactions through ewallet services such as Oxigen, Paytm and
MobiKwik has shot up from 17 lakh — recorded on November 8 when
demonetisation was announced — to 63 lakh as on December 7 (a
growth of 271%). In terms of value, the surge has been 267%, from Rs
52 crore daily to Rs 191 crore now.
22
Digital revolution: Digital revolution has provided an easy way to go
for digital payments. India has more than 100 crore active mobile
connections and more than 22 crore smartphone users as of March 2016.
This number is going to increase further with a faster internet speed. The
reach of mobile network, Internet and electricity is also expanding digital
payments to remote areas. This will surely increase the number of digital
payments.
Highway toll: 10% discount on NH toll payment via RFID or fast-tags in 2016-
17. Insurance: 10% discount by government general insurers on premium paid
online via their portals.
23
8% discount on new LIC policies bought online via its site.
POS: Rs 100 a month is the maximum rent that PSU banks can charge for PoS
terminals.
24
1.9 AT THE GLOBAL LEVEL
As per the report of Capgemini6 on Trends in Payments 2018, the Top 5 trends
Tends in Digital Payments across the world are as follows:
i. Banks and FinTech’s are exploring block chain technology for cross-
border payments to provide faster, inexpensive, and efficient services.
ii. The current cross-border payments model lacks an international
clearinghouse and relies on correspondent banks, which causes
inefficiency, slow speed, and high cost. As a result, corporate
customers are demanding transformation.
25
iv. A distributed ledger-based cross-border payments model is expected
to result in improved efficiency, enhanced security, and lower costs
As global cyber-attacks rise, regulators focus on data-privacy law
compliance:
27
1.10 CHALLENGES TO THE INDUSTRY
Every coin has two sides so as the digital payments. Despite many
advantages, digital payments have a few drawbacks also. Difficult for a
non-technical person: As most of the digital payment modes are based on
mobile phone, the internet and cards. These modes are somewhat difficult
for non-technical persons such as farmers, workers etc.
The risk of data theft: There is a big risk of data theft associated with
the digital payment. Hackers can hack the servers of the bank or the E-
Wallet you are using and easily get your personal information. They can
use this information to steal money from your account.
28
CHAPTER 2: RESEARCH METHODOLOGY
2.1 INTRODUCTION
Methodology is the systematic, theoretical analysis of methods applied
to a field of study. It comprises the theoretical analysis of the body of
methods and principles associated with a branch of knowledge.
Typically, it encompasses concepts such as paradigm, theoretical
models, phases and quantitative and qualitative techniques. A
methodology does not set out to provide solutions- it is therefore not the
same as method. Instead, it offers the theoretical underpinning for
understanding which method, set of methods or best practices which can
be applied to a specific case, to calculate a specific result.
29
2.2 OBJECTIVES
2.3 HYPOTHESES
H13: There is a significant impact of the age of respondents on the usage of digital
payments.
30
2.4 RESEARCH METHODOLOGY
This study focuses on the growth of digital payments and consumers’ perception
towards this evolution.
ECOMMERCE VENDORS:
32
2.6 LIMITATIONS OF THE STUDY
33
CHAPTER 3: REVIEW OF LITERATURE
3.1 INTRODUCTION
Review of literature are the secondary sources of data collection collected from
different national and international journals , magazines, annual reports of
government organizations, bulletins, departmental journals, corporate
publications and other reliable sources.
34
3.2 LITERATURE REVIEW
It was observed that a whole lot of research has already gone into
‘Digitization of payments’ both at a local level and a global level. A brief
of some of the earlier research studies are given below.
35
effect. He investigates that cashless transaction system also has its
usability and affordability for the consumers.
36
Preeti Garg, Manvi Panchal (2017): The study conducted to
introduce the cashless economy to India. The main objective is to
bring awareness to the citizens about the cashless economy and to
study the benefits and challenges of the cashless economy. He
collected the data with 100 respondents and analysed the data by
using simple statistical tools. He concluded the topic by saying
many people agreed to adopt the cashless economy because it
helps to fight against illegal activities, corruption etc.
37
development of banking industry, fixed income group also begins
the use of plastic and electronic money payment systems and
especially credit cards.
Price Water House Coopers, India‘s (2015) report explained
unbanked population was at 233 million. Even for people with
access to banking, the ability to use their debit or credit card is
limited because there are only about 1.46 million points of sale
which accept payments through cards. A study by Boston Consulting
Group and Google in July noted that wallet users have already
surpassed the number of mobile banking users and are three times
the number of credit card users.
Torbet and Marshall (1995), ―One in the eye to plastic card
fraud. This study evaluates the potential use of behavioural and
physiological techniques in the battle against credit card fraud in
the retail environment. It discusses different techniques such as
automatic speaker, dynamic signature verification, fingerprint,
facial recognition, retinal and iris scanning, hand and finger
geometry. Author feels that while biometric technologies have the
potential to reduce plastic card fraud there are several problems
which must be addressed before they can be used in retail
environments, like the recognition performance, speed of use,
usability, customer acceptance, device cost are considered along
with industry standards for biometric devices.
Handelsman and Munson (1989) commented that ―Switching
behaviours from credit card to cash payment among ethnically
diverse retail customers’ shows that the credit card sales
constitute an important revenue source for many retailers. Their
ever-increasing use and evaluation into other forms, such as debit
38
and electron cards, demands that retailers gain a more complete
understanding of how they are used by diverse consumer
segments. Particularly needed is a better understating of the
propensity to switch over from credit card to cash payment and the
incentive required to initiate switching.
RESEARCH GAP
The literature review shows that a lot of study has been made in the field
of digital payments. However, on close observations, it can be seen that
the studies conducted in the past lack consideration of some key factors
relevant to the scope of the study.
For instance, the increasing use of digital modes for payments in India
is bringing in many changes in the retail sector.
39
CHAPTER 4: ANALYSIS AND INTERPRETATION OF DATA
40
Respondents selected using simple random sampling comprised of 68% females
and 32% males.
42
Out of those surveyed, 92% people were aware of digital payment mechanisms.
CONCLUSION:
• It can be concluded from the survey that the most used digital payments
mechanisms are debit and credit cards.
43
• Out of 165 respondents, 156 said that they had used cards to make payments
NEFT/RTGS was the next most used electronic payment method.
• 49% which accounts to 81 respondents selected this mode as their used
payment mechanism.
44
Respondents were asked about digital payment applications, 67% said
they used PayTM and Gpay.
37% used Amazon Pay, 22% used PhonePe and 20% used Ola Money.
The BHIM App launched by the Government of India to promote the
Digital India program also saw a response from 19% of universe of
research.
Among the less popular ones are Citrus and MobiKwik with 5% and 9%
respectively.
45
• The samples surveyed show that most people who spend digitally did so,
on a monthly basis.
The respondents were given a list of reasons as to why they preferred going
cashless. The gist of responses is as follows:
• Most people agreed that digital payments provided the ease and
convenience that traditional payment mechanisms did not.
46
• 93% respondents said they make digital payments due to this very reason.
• The recent splurge of cashback benefits was another reason cited for
making payments via electronic modes.
• 43% people said they preferred paying digital due to the benefits that they
received in forms of cashback.
• Credit cards were also a rage among the e-payments industry. Hence, the
option of credit period as an incentive was also provided to the
respondents.
• 16% of the surveyed agreed to going digital because of the credit period
allowance that these mechanisms provide.
47
said that it was one of the factors why they preferred making digital
payments.
• Travel: Analysts and industry insiders have long speculated the disruption
mobile payment technology will have on the way travellers shop and
complete online bookings. This study depicts that travel was among the
expenses that consumers spend digitally. 87 respondents used digital
payments for travel expenses.
Many local grocery stores have started accepting digital payments in the
form of cards or e-wallets. 39% respondents also paid their grocery bills
electronically.
48
upswing. 54% of respondents paid electronically towards their
entertainments.
• Restaurant Bills: The survey also observes that around 59% of the 165
prefer paying digitally in restaurants. Recent examples explaining this
preference could be MobiKwik which has enabled cashless payments
across 8000 restaurants in India. Similarly, free charge which has
partnered with restaurants like Haldiram’s, McDonald’s, Barista, and
CCD amongst others is happy to associate with offline restaurant players.
49
Bank payments digitally.
For many, there is still a lack of trust for digital payments. There are
those that don't yet feel safe using this as they don't trust the Internet and
the perceived security risks and fairly so. When asked about the
problems that the users of e-payment mechanisms had to face, the
following results were extracted:-
50
Issues faced Number of respondents
Security Breach 2
Double Payments 30
Others 11
51
The chart shows the graph of income levels and awareness of digital
payments. It shows that there is no impact of income levels on digital
payments.
Thus, the hypothesis (H12) of this study gets rejected and null hypothesis (H02)
is accepted.
The line graph compares the usage of digital payments and respondents’ age.
It can be seen that there is a significant impact of age on usage of digital
payments.
Thus, the hypothesis (H13) is accepted and null hypothesis (H03) is rejected.
52
CHAPTER 5: FINDINGS AND CONCLUSIONS 5.1
FINDINGS
The graph shows that there is no impact of income levels on the awareness about
digital payments.
Even at Nil income, majority of the respondents were aware of electronic
payment mechanisms.
In the income group of 2lakh to 5 lakh, 100% of those surveyed were aware
of digital payment tools.
In the higher income group of Rs. 10 lakhs and above also, all respondents were
aware of digital payments.
Hence, the study analyses that income level has no impact on awareness about
digital payments.
53
54
The graph shows the age-wise awareness levels of digital payments. It
can be seen that all respondents belonging to the age group of 60 and
above are aware of digital payments. The technological wave has
penetrated even to the older sections of the society. Catchy
advertisements and perfectly placed promotional banners could be
reasons for such great degree of awareness among the masses.
The trend lines above show a clearer picture of the actual usage of digital payment
mechanisms.
This chart indicates that the most active users of electronic payment
methods are the respondents of age group 18 to 30. The reasons for this
may be a stronger risk appetite and higher adaptability to the ever-
changing technology.
55
On the other hand, senior citizens are the most averse from paying
digitally. The study finds that even though the awareness about cashless
mechanisms among this age group is high, their frequency of using those
methods is very less. Senior citizens being fixed income earners mostly
via pensions do not have an appetite for risk. Also, the e-payments
industry is ever expanding and new innovations make their way in with
every passing moment. Thus, due to low adaptability, the older
generation prefers traditional cash-based approach.
56
of the total population: 64.84 percent in urban India, and 20.26 20per
cent for rural. As far as mobile broadband is concerned, there are 5.5
21subscriptions for every 100 people. There is also a stark disparity in
connectivity across states, explained by differing levels of affluence.
Since affluence also determines access to superior quality of
connections, many users in India have to contend with low-speed
internet connectivity. Affluence also explains why only 18 percent of
Indians owned smartphones as of March 2016.
i. 58.4 percent of the nation's wealth owned by the richest 1 per cent.
ii. 80.7 percent of wealth owned by the richest 10 percent.
vii. 56 percent with education only up to primary level, six percent with
viii. 3.05 percent with formal training, while 12.46 percent with 33in
formal training.
57
The degree of financial inclusion in India
58
of the bank accounts opened under the Pradhan Mantri Jan 35Dhan
Yojana scheme have been dormant.
What are the ramifications of low financial inclusion for adoption of non-
cash payments? First, all electronic payment instruments presume the
existence and use of bank accounts with appreciable levels of balance
maintained in these accounts. After all, electronic transactions are
essentially transfers of funds from the payer’s bank account to the
payee’s account. Second, financial illiteracy acts as a handicap in
grasping the technicalities involved in using electronic payment
instruments and in appreciating the merits and gains that follow from
such use.
The Micro, Small and Medium Enterprises (MSME) in India find their
credit needs inadequately met. In 2013, a meagre 5.18 percent of both
registered and unregistered MSMEs borrowed from institutional
sources, while as little as 2.05 percent borrowed from non-institutional
entities, leaving a significant 92.77 percent to rely on self-finance.
59
Lack of a widespread merchant acceptance network in India
60
Such costs render dealing with cash more economical and 42dissua de
retailers from going cashless.
61
Ease of doing business in India
62
In August 2017, the Supreme Court upheld the right to privacy as a
fundamental right and instructed the government to put in place a
stringent and broad-based regime of data protection laws. Accordingly,
the government has appointed a committee under the chairmanship of
former Supreme Court judge, Justice B N Srikrishna, which is currently
49in the process of drafting the new laws.
The launch of the ‘Digital India’ campaign in July 2015 reflects the
government’s commitment to the principles of efficiency and
transparency in governance. The following are some of the initiatives
introduced under this campaign. The National e-Governance Plan
aspires seamless electronic access to government services for all 50
citizens. Recognising the value of increased citizen participation in the
governance of the nation, the MyGov initiative provides a common
platform that brings people together to deliberate upon important 51is
sues and ideating solutions to problems. A common Biometric
Attendance System (BAS) has been introduced across several union
government offices in Delhi and in several state and civic governments
52t o maintain digital records of employee attendance. The e-hospital
application, meanwhile, digitises services in the domain of health 53
care—for instance, online appointments and online payment of fees. For
its part, the National Scholarship Portal seeks to completely transform
the process of disbursing scholarships with all of the stages 54 from
applying for scholarships to the final payment being digital. The Pradhan
Mantri Gramin Digital Saksharta Abhiyaan aims at improving 55th e
level of digital literacy in rural areas.
63
Innovation in the digital payments landscape in India
64
batch payments. Spain, Kenya, Poland, Finland, UK, Singapore,
Denmark and Switzerland possess some of these features and, therefore,
are ranked at level four.
Among the 2.98 lakh merchants enrolled, 82,746 merchants in rural areas
enabled under the scheme to use digital payment tools were on Paytm
wallet. Nearly one in three rural persons newly enrolled on electronic
payment systems under the Centre’s outreach programme for digital
transactions in the hinterland the Digi-Dhan Abhiyan has registered on
65
the Alibaba-backed mobile wallet Paytm. Compared with the 28.92 per
cent share of Paytm in the total rural citizens registered under the scheme
since its launch, the adoption of the government-backed Unified
Payment Interface (UPI) and Unstructured Supplementary Service Data
(USSD) schemes was cumulatively just over 20 per cent, the government
data showed. Under the Abhiyan, launched on December 9, village level
entrepreneurs of the Common Service Centres (CSCs) launched by the
government as a strategic cornerstone of its Digital India programme
organise workshops, where bankers and other stakeholders are invited.
These entrepreneurs explain various modes of electronic payments to
rural citizens. According to the information provided by the Ministry of
Electronics and Information Technology (MeitY), as on December 28, a
total of 1.05 crore citizens in rural areas of the country had been brought
on-board various digital payment tools during the period, of which the
biggest chunk 30.34 lakh were on Paytm. Among the 2.98 lakh
merchants enrolled, 82,746 merchants in rural areas enabled under the
scheme to use digital payment tools were on Paytm wallet. According
to the format, the village level entrepreneurs, while registering
merchants under the programme, have to conduct transaction
verification.
Paytm. After Paytm, among the rural consumers, the State Bank of
India’s wallet SBI Buddy was the second most enrolled tool at 19.58 lakh
66
beneficiaries. Even as wallets were the biggest draw among the target
audience over 60 per cent of the rural citizens who enrolled for digital
payments under the scheme preferred e-wallets, while the combined
adoption of UPI and USSD stood at 20 per cent followed by net banking
options at 10 per cent all the other non-bank wallets such as Freecharge,
MobiKwik, Oxigen, Airtel Money, Vodafone m-Pesa, cumulatively had
21.99 lakh users registered on their platform under this scheme, much
lower than the 30.34 lakh on Paytm.
5.3 CONCLUSIONS
This paper makes the case that any form of progress and development in
a given system that aspires to reach its pinnacle cannot bypass core
structural deficiencies of that system. This holds true in the context of
digitalisation of transactions. There are no shortcuts to becoming
cashless. The rate at which cash is becoming irrelevant in this economy,
banks and other financial institutions will have to consider reconfiguring
their business processes and functioning with the smartphone being the
point of reference. This will allow digitalisation of transactions involved
in financial intermediation.
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The findings reveal that while people are getting comfortable with
cashless payments, some kind of negative perceptions are holding back
many from adopting the new system. The negative perceptions are
security problems, poor network coverage, and lack of merchant
willingness, high transactional costs, lack of users’ knowledge on
technology, defunct POS machines, delayed reimbursement in case of
failed transactions, procedures and financial limits. Convenience in use
of cashless transactions and incentive system are the positive signs for
the progress of cashless payments in India. Finally the study concludes
that India may not become a cashless economy unless the perception of
the people will be rightly addressed by the government and the banking
institutions. They should pave the way for the safe and secure mean to
cashless transactions.
5.4 RECOMMENDATIONS
As per Ministry of Finance Report (December 2016) on Digital payment,
financial inclusion is one of the foremost challenge facing India. 53
percent of India population had access to formal financial services. In
this context, digital payment can act as accelerator to financial inclusion.
Increasing availability of mobile phone, availability of data network
infrastructure, rollout of 3G and 4G networks and large merchant eco
system are the critical enablers of digital payment in India. It is further
supported by the coordinated efforts of industry, regulator and
government. As per RBI’s report ‘Vision 2018’ four pronged strategy
focusing on regulation, robust infrastructure, effective supervisory
mechanism and customer centricity has been adopted to push adoption
of digital payment in India.
68
The percentage of cash for transactions has seen a rapid decline in the
past few years in India. In 2010, the percentage of cash in all payments
was 89% compared to 78% in 2015. This rapid decline is a result of an
increased adoption of non-cash instruments such as cards and digital
payments such as mobile wallets, electronic transfers, etc. Stored value
instruments like mobile wallets (Paytm, Mobikwik, Citrus, etc.) and
prepaid and gift cards have made payments though internet devices
convenient and easy. India represents one of the largest market
opportunities for digital payments.
69
and inconvenience of operating a cash-based payments system appear as
effective alternatives.
Long-term strategies
Short-run measures, however successful, can only bring small
increments to the process of digitalisation. This is India’s experience.
Becoming cashless represents a paradigmatic shift and requires certain
structural parameters in place. These structural parameters are the object
of long-term policy-making.
India is emerging as a large potential market for digital transactions. To
unlock this potential, India has to address its structural deficiencies. For
example, NACH is currently catering to the demand of a very small
formal sector in India. The formalisation of India’s informal economy
will make NACH ubiquitous. Financial inclusion, increased smartphone
ownership supported by rising incomes, and improved digital
infrastructure will boost usage of UPI, M-Wallets, and debit and credit
card transactions in India.
70
Digitalising India’s Industrialisation:
As of 2016-17, after three years since the launch of this campaign, the
contribution of the manufacturing sector to the country’s GDP has
remained at 16 percent, which has been the same for two and a half 92
decades. The fact that about one million enter the labour market every
month, the creation of only 6,41,000 jobs between 2014 and December
9320 16 leaves much to be desired.
Yet, it must be acknowledged that much has been done under the aegis
of the ‘Make in India’ campaign to create a favourable business
environment in the country. Increased investments in public
transportation systems, labour and power sector reforms, the GST reform
are some examples. The impact of these measures is reflected in India’s
improved score on the Logistics Performance Index 2016 and the 94Ease
of Doing Business Index 2018, both published by the World Bank. It is
expected that these improvements will translate into more jobs and more
industrial output in the near future.
71
products, purchase raw materials online, and making factor payments
such as salaries and wages online.
72
potential borrower. Administering of questionnaires to collect
psychometric data that allows reliable prediction of repayment behaviour
is another innovation introduced in appraising credit worthiness. This
process is also flexible in that the inability to provide formal account
statements or some other document required conventionally does not
always entail rejection. Alternate sources of information are perused to
compensate for unavailability of such documents. Nevertheless, the risk
assessments are sound and well-calculated ruling out threats to survival
in the market. These companies have also used technology to introduce
an easy and time-effective credit disbursal process. These firms are also
willing to offer collateral free loans.
73
In the initial phase of starting a business, the inability to produce certain
documents must not vitiate the chances of a talented entrepreneur being
financed. However, the financial regulators must insist that, once
established, the process for accessing credit must necessitate the need to
maintain digital books of account, digital records of various transactions,
purchases and sales, and payments made towards operating costs and
logistics.
The government must also draw its attention to the gains that can follow
from providing financial and logistical assistance to businesses required
74
to operate on existing e-commerce websites and launching an e-
commerce website for entrepreneurs in cases where none exists. This
recommendation is motivated by the findings of the 2017 report titled
'Impact of internet and digitisation on SMBs in India', published by
KPMG and Google – MSMEs that operate online increase their revenue
and profit twice as fast as those operating offline. Online players serve a
wider base of customers located beyond their city than offline players.
Online businesses generate many more jobs than their offline
counterparts.
75
requirements of the industry and assessing the mismatch between skills
demanded and those supplied in order to prepare the roadmap for
implementation. This roadmap is to guide decision making on several
pertinent issues, for example, who will train, how to train the trainer,
issues relating to assessment and certification, and affiliation of training
institutions.
76
BIBLIOGRAPHY:
Research thesis:
Research journals:
https://www.academia.edu/37440525/Awareness_and_Preference_towards_Dig
ital_Payment_Mechanisms A_Study_of_Customer_Perceptions
https://dsim.in/blog/2017/04/14/case-study-digital-paymentslandscape-in-india-
2017-trends-future/
https://shodhgangotri.inflibnet.ac.in/bitstream/123456789/5766/1/synopsis%20s
unil.Pdf
https://www.academia.edu/33394371/A_STUDY_ON_IMPORTANCE_OF_C
ASHLESS_TRA NSACTIONS_IN_INDIA
Government publications:
http://vikaspedia.in/e-governance/digital-payment/trends-issues-and-
opportunities-indigitalpayments http://meity.gov.in/digidhan
77
http://niti.gov.in/writereaddata/files/document_publication/DigitalPaymentBoo
k.pdf
Corporate publications:
PAYMENTS_IN_INDIA_GOING_E-WAY_-_AN_ANALYSIS.pdf
https://www.ey.com/Publication/vwLUAssets/ey-the-payments-
revolution/$FILE/ey-the-
Paymentsrevolution.Pdf
https://www.capgemini.com/wp-
content/uploads/2017/12/paymentstrends_2018.Pdf
https://www.livemint.com/Technology/ACHEI1t6mB34c4xM5DiTsN/The-top-
five-trends-inIndiasdigital- payment-landscape.html
http://www.dcsplus.net/blog/why-mobile-payments-are-finally-the-next-big-
thingin-travel
78
Annexures
Questionnaire:
1. Age
a) 18 to 30
b) 31 to 45
c) 46 to 60
d) 60 and above
2. Gender
a) Male
b) Female
3. Occupation
a) Student
b) Service
c) Professional
d) Business Owner
e) Retired
4. Annual Income
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5. Are you aware of digital payment mechanisms?
a) Yes
b) No
c) Maybe
a) PayTM
b) BHIM/ UPI
c) Citrus
d) Mobikwik
e) OlaMoney
f) Amazon Pay
g) Others
a) Daily
b) Weekly
c) Once a month
d) Once in six months
e) Never
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9. Why do you prefer to pay digitally?
a) Ease/ Convenience
c) Credit period
d) Others
a) Travel
b) Groceries
c) Entertainment
d) Restaurants
e) Online Shopping
f) Bank Payments
g) Others
______________x_________________
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