Research paper focuses on different types of cashless transaction in India.
Government of India the cashless policy will increase employment, reduce cash
related robbery thereby reducing risk of carrying cash. Cashless policy will
also reduce cash related corruption and attract more foreign investors to the
country. In many countries introduction of cashless economy can be seen as
steps in the right direction. It is expected that its impact will be felt in
modernization of payment system, Reduction in the cost of banking service,
Reduction in high security and safety risk and also curb banking related
corruption. Electronic banking will be made banking transaction to be easier by
bringing services closer to its customers hence improving banking industry
Major challenges that can hinder the implementation of the policy are
cyber fraud, High illiteracy rate, attitude of people, lack of transparency
& efficiency in digital payment system. The study shows that the
introduction of cashless economy in India can be seen as a step in right direction.
It helps in growth and development of economy in India.
corruption, Black money, India, Digital Payments.
has implemented a major change in economic environment by demonetizing the high
value currency notes of – Rs 500 and Rs 1000 from 8th November 2016 and push
India towards cashless future.
What is cashless economy: A cashless
economy is one in which all the transactions are done through electronic
channels such as debit/credit cards, Immediate Payment Service (IMPS), National
Electronic Funds Transfer (NEFT) and Real Time Gross Settlement (RTGS). The
circulation of physical currency is minimum. The Indian economy continues to be
driven by the use of cashless than 5% of all payments happen electronically.
Electronic based transaction seeks to drive the development and modernization
of India’s payment system. The essence of the policy is to shift the economy
from a cash based economy to a cashless one.
transactions have gone up in recent times, a meaningful transition will depend
on a number of things such as awareness, technological developments and
government intervention. For instance, mobile wallets have seen notable
traction, and it is possible that a large number of Indians will move straight
from cash to mobile wallets. The availability and quality of telecom network
will play an important role. People face difficulties in making electronic
payments even in metro cities because of poor network. Service providers will
have to constantly invest in technology in order to improve security and ease
of transaction. People will only shift when it’s easier, certain and safe to
make cashless transactions. The government will also need to play its part. It
will have to find ways to incentivize cashless transactions and discourage cash
payments. Difficulties in changing attitudes and perception of people towards
moving digital payments. India is dominated by small retailers. They don’t have
enough resources to invest in electronic payment infrastructure.
Review Of Literature
literature paves way for a clear understanding of the areas of research already
undertaken and throws a light on the potential areas which are yet to be
covered. Keeping this view in mind, an attempt has been made to make a brief
survey of the work undertaken on the field of Cashless economy. The reviews of
some of the important studies are presented below. Cashless economy is not the
complete absence of cash, it is an economic setting in which goods and services
are bought and paid for through electronic media. According to Woodford (2003),
Cashless economy is defined as one in which there are assumed to be no
transactions frictions that can be reduced through the use of money balances,
and that accordingly provide a reason for holding such balances even when they
earn rate of return. In a cashless economy, how much cash in your wallet is
practically irrelevant. You can pay for your purchases by any one of a plethora
of credit cards or bank transfer (Roth, 2010) observed that developed countries
of the world, to a large extent, are moving away from paper payment instruments
toward electronic ones, especially payment cards.
Jain, P.M (2006)
the article ?E-payments and e-banking? opined that e- payments will be able to
check black ?An Analysis of Growth Pattern of Cashless Transaction System.
Taking fullest advantage of technology, quick payments and remittances will
ensure optimal use of available funds for banks, financial institutions,
business houses and common citizen of India. He also pointed out the need for
e-payments and modes of e-payments and communication networks.
The aim behind this Research is
know what a Cashless Transaction means.Types
of cashless transaction
What is Cashless
economy is one in which all the transactions are done using cards or digital
means. The circulation of physical currency is minimal.”
Society describes an economic state whereby financial transactions are not
with money in
the form of physical banknotes or coins, but rather through the transfer of
(usually an electronic representation of money) between the transacting
Digital Payment Methods
The Digital India programme is a
flagship programme of the Government of India with a vision to transform India
into a digitally empowered society and knowledge economy. “Paperless, Faceless,
Cashless” is one of professed role of Digital India.
As part of promoting cashless
transactions and converting India into less-cash society, various modes of
digital payments are available.
Cards are provided by banks to their
account holders. These have been the most used digital payment modes till now.
Many of us use cards for transferring funds and making digital
payments. Credit cards, debit cards and prepaid cards are the main types
of cards. You can also use Rupay debit card for
Credit cards are issued by banks and some other entities authorized by
RBI. These cards give you the ability to withdraw or use extra money. Credit
cards are used for domestic as well as international payments.
Debit cards are issued by the bank where you have your account. You can
use these cards for the money in your account. The payments you make with these
cards debit from your account and credit immediately to the payee’s account.
You can use these cards to make payments to one bank account to another.
banking or *99# Banking is a mobile banking based digital payment mode. You do
not need to have a smartphone or internet connection to use USSD banking. You
can easily use it with any normal feature phone. USSD banking is as easy as
checking your mobile balance. You can use this service for many financial and
non-financial operations such as checking balance, sending money, changing MPIN
and getting MMID.
The *99# code works as a bridge
between your telecom operator’s server and your bank’s server. It uses your
registered mobile number to connect with your bank account. Hence, dial *99#
with your registered number only. USSD banking has a transaction limit of Rs.
5000 per day per customer. RBI has also set a maximum charge of Rs. 2.5 per
is an Aadhaar based digital payment mode. The term AEPS stands for Aadhaar
Enabled Payment Service. Customer needs only his or her Aadhaar number to pay
to any merchant. AEPS allows bank to bank transactions. It means the money you
pay will be deducted from your account and credited to the payee’s account
You need to link your Aadhaar number
to your bank account to use AEPS. Unlike Debit cards and USSD, AEPS does not
have any charges on transactions. You can use AEPS with the help of PoS (Point
of sale) machines. You can withdraw or deposit cash, send money to another
Aadhar linked account with it. The good thing about AEPS is that it doesn’t
need your signature, bank account details or any password. It uses your
fingerprint as a password. No one can forge your fingerprints, thus it is
the most secure digital payment mode.
UPI or unified payment interface is
a payment mode which is used to make fund transfers through the mobile app. You
can transfer funds between two accounts using UPI apps. You will have to
register for mobile banking to use UPI apps. Currently, this service is only
available for android phone users. Hence you can use UPI only when you have an
You need to download a UPI app and
create a VPA
or UPI ID. There are too many good UPI apps available such as BHIM,
SBI UPI app,
HDFC UPI app, iMobile, PhonePe
app etc. It is not mandatory to use the UPI app from your bank to enjoy UPI
service. You can download and use any UPI app.
UPI apps are a faster solution to
send money using VPA or even IFSC
and account number. But they have some limitations also. If you do not have an
android phone you cannot use UPI app, It is not for you. Lack of stable
internet connection can also cause trouble for these apps.
E-wallet or mobile wallet is the
digital version of your physical wallet with more functionality. You can keep
your money in an E-wallet and use it when needed. Use the E-wallets to recharge
your phone, pay at various places and send money to your friends. If you have a
smartphone and a stable internet connection, you can use E-wallets to make
payments. These E-Wallets also give additional cashback offers. Some of the
most used E-wallets are State bank buddy, ICICI Pockets, Freecharge, Paytm etc.
E-Wallets are an easy and faster way
to make payments but have some limitations. These apps are good if you send
money to a wallet to another. But if you want to send money to a bank account
these apps are not suitable. Also, you have to be extra careful with these
apps. These apps do not ask for any PIN or password when you perform a
transaction using your wallet money. If you do not lock your phone, anyone can
use the money in your wallet. I suggest you must lock your phone if you want to
use E-Wallet apps.
Prepaid cards are another type of cards which you use to pay digitally.
You must have to recharge these cards before using just like prepaid SIM cards.
Cards are one of the best modes when
you pay at portals or E-commerce sites. But if we talk about paying to
merchants it is not the most suitable way. It charges 0.75% – 2.0% on
transactions. Also, you cannot use cards to pay if the merchant does not
have a PoS (swipe) machine.
Mobile phones as a medium for
providing banking services have been attaining increased importance. Reserve
Bank brought out a set of operating guidelines on mobile banking for banks in
October 2008, according to which only banks which are licensed and supervised
in India and have a physical presence in India are permitted to offer mobile
banking after obtaining necessary permission from Reserve Bank. The guidelines
focus on systems for security and inter-bank transfer arrangements through
Reserve Bank’s authorized systems. On the technology front the objective is to
enable the development of inter-operable standards so as to facilitate funds
transfer from one account to any other account in the same or any other bank on
a real time basis irrespective of the mobile network a customer has subscribed
Point of Sale (POS) Terminals /
Presently, there are over 61,000
ATMs in India. Savings Bank customers can withdraw cash from any bank terminal
up to 5 times in a month without being charged for the same. To address the
customer service issues arising out of failed ATM transactions where the
customer’s account gets debited without actual disbursal of cash, the Reserve
Bank has mandated re-crediting of such failed transactions within 12 working
day and mandated compensation for delays beyond the stipulated period.
Furthermore, a standardized template has been prescribed for displaying at all
ATM locations to facilitate lodging of complaints by customers.
There are over five lakh POS
terminals in the country, which enable customers to make payments for purchases
of goods and services by means of credit/debit cards. To facilitate customer
convenience the Bank has also permitted cash withdrawal using debit cards
issued by the banks at PoS terminals.
The PoS for accepting card payments
also include online payment gateways. This facility is used for enabling online
payments for goods and services. The online payment are enabled through own
payment gateways or third party service providers called intermediaries. In
payment transactions involving intermediaries, these intermediaries act as the
initial recipient of payments and distribute the payment to merchants. In such
transactions, the customers are exposed to the uncertainty of payment as most
merchants treat the payments as final on receipt from the intermediaries. In
this regard safeguard the interests of customers and to ensure that the
payments made by them using Electronic/Online Payment modes are duly accounted
for by intermediaries receiving such payments, directions were issued in
November 2009. Directions require that the funds received from customers for
such transactions need to be maintained in an internal account of a bank and
the intermediary should not have access to the same.
Internet banking refers to banking
services and products provided by any bank online. These include making
transfers, payments, checking one’s balance, etc. via a bank’s website.
There are different types of
internet banking transactions:
National Electronic Fund Transfer
(NEFT): This is a country- wide payment system that facilitates the
transfer of funds from one entity to the other. Under this Scheme, individuals,
firms and corporates can electronically transfer funds from any bank branch to
any individual, firm or corporate that has an account with any other bank
within the country. NEFT payments are capped at Rs. 50,000 per
Real Time Gross Settlement (RTGS):
RTGS is meant to be used for high-value transactions with the minimum amount
that can be transferred being set at Rs. 1 lakh. Transactions made
through this are monitored by the Reserve Bank of India and cannot be reversed.
Electronic Clearing System (ECS):
This service facilitates the payment of utility bills in particular. Transaction
charges levied on using these services vary from bank to bank.
Service (IMPS): IMPS offers an
instant, 24X7, interbank electronic fund transfer service through mobile
phones. IMPS is an emphatic tool to transfer money instantly within banks
across India through mobile, internet and ATM which is not only safe but also
economical both in financial and non-financial perspectives.
Micro ATM meant to be a device
that is used by a million Business Correspondents (BC) to deliver basic banking
services. The platform will enable Business Correspondents (who could be a
local kirana shop owner and will act as ‘micro ATM’) to conduct instant
The micro platform will enable
function through low cost devices (micro ATMs) that will be connected to banks
across the country. This would enable a person to instantly deposit or withdraw
funds regardless of the bank associated with a particular BC. This device will
be based on a mobile phone connection and would be made available at every BC.
Customers would just have to get their identity authenticated and withdraw or
put money into their bank accounts. This money will come from the cash drawer
of the BC. Essentially, BCs will act as bank for the customers and all they
need to do is verify the authenticity of customer using customers’ UID. The
basic transaction types, to be supported by micro ATM, are Deposit, Withdrawal,
Fund transfer and Balance enquiry.
The study is conducted to obtain data on introduction
of Cashless economy in India. The study is conducted in Kandivali and Borivali
(Mumbai). A sample size of 75 was selected using the convenience sampling
procedure out of which 72 copies were retrieved in usable form. This represents
a response rate of 96 %.The sample includes both literate and illiterate
population since they are the ones who give their views on introduction of
cashless economy and use of digital payment methods, there response determine
the reliability of survey. Survey method is used for collecting data with the
help of questionnaire .The responses from the respondents were collected and
analyzed using the simple percentage method.
Data Analysis & Interpretation:
Table 1: Knowledge of Cashless Policy to users
I have heard
about India’s Cashless Economy?
Economy should be introduced in India.
Above Table shows that there is a high degree of
awareness among the population about 96% of the respondents are aware of
cashless economy in India. The study considered academic community which means,
by all standards they are expected to be fairly aware of the happenings in the
society. Few respondents however show a strong dislike for the cashless
economy. While 93.1 % of the respondents prefer that cashless economy should be
introduced in India. The following reasons might have accounted for the low
enthusiasm about its immediate introduction, the lack of preparedness for the
system, the nation having other problems to solve now, freedom to use cash to
any amount, inadequate technology, and that the flow of money will be hampered.