The objective of this 3 part series is to examine in brief the barriers and motivators for the key players in India’s (the author believes it has elements that can stand true for any economy that intends to go cashless) Journey towards a cashless society. In part 1 and 2 can be read at Finextra Blogs.

Business (Issuers/Acquirers):  The estimates in terms of number of retail outlets vary from 40- 90 million. However large number of them have very little capability and incentive to acquire POS terminals. The current merchant acquirer in market find it to be a loss making business which needs cross subsidization in one or the other form.

Barriers

• Interoperability of wallets: lack of it makes it impossible to act as a service provider for multiple players.
• Lack of profit pool given high costs of loading money into a Wallet
• No commercial model for Utility payment (Gas, Electricity, Water), almost negligible revenue for partners.
• Addition of a New biller is a tender driven cumbersome process
• Profitability at Merchant Acquirer

Motivators

• Include investments in setting up the payments infrastructure as Priority sector lending
• Tax moratorium for a defined period
• Higher commission payout for G2P disbursals then as recommended in
• Revenue model for facilitating payments towards Government run Utility payments
• Simplified approval process for mandates and tenders

G2P Electronic Disbursals

Providing poor G2P recipients with financial services strengthens the development impact of G2P payments. A growing body of evidence shows that financial services enable poor people to better withstand shocks, build assets, and link into the wider economy as fuller economic citizens. Digital enablement of G2P is seen as one of the biggest contributor in reducing the cost of cash in economy.

Barriers

• Last mile delivery capability
• Lack of incentive for the BC outlet
• Disbursement via multiple modes impacting the BC touch point viability
• Acceptability of mobile pin and OTP as viable authentication mechanism

Motivators – Consumer/BC

• Consumer : Direct credit in mobile money a/c
• BC : A commission in line of the UIDAI report or above of 2 %
• BC : Movement of G2P funds via BC touch points will improve viability 
• Consumer: Next door availability of funds.
• Ability to pay for multiple services using one form factor

Motivators – Govt

• Improvement in Efficiency of disbursement
• Increased utilization of subsidy impacting the scheme objectives
• Enhances transparency and Trust in government
• Improves speed of delivery

 As per Mckinsey report (The benefits of e-payments to Indian society- 2010) in 2008-09, payments between the Indian government and individual households amounted to INR 13.3 Lakh cr. An electronic platform to and from Individual households could save an estimated 1 lakh cr a year.

Of course, it can be argued what type of solutions will work best towards taking India to Cash less but active participation of

• Government
• Retailer
• Consumer
• Business /Merchant Acquirer

 is surely a great start towards India’s Journey to Cashless Society.