Cashless Payment Boon Or Bane

By: Dr. Sanchita Ghatak ( Asstt. Editor-ICN Group )

LUCKNOW: An abrupt pronouncement by the PM Modi on the eve of 8th August 2016 that currencies valued 500 and 1000 have been devalued brought lots of shudders and commotion in the lives of general public in India.This was demonetization brought up by PM Modi to curb the menace of black money and fake notes by reducing the amount of cash available in the system.

This was intended to make India free from all kinds of corruptions.

This major step taken by GOI also led to promotion of cashless payments by the digital. Harping upon the cons and the downsides of a cashless society, cyber frauds and other cybercrimes and attacks pose to be the serious potential risks with digital transactions. Despite of all these known threats we have moved to electronic payment system to have more convenience in terms of payments.

Currently available e-payment modes are National Electronic Funds Transfer (NEFT), Real Time Gross Settlement ( RTGS ), Immediate Payment Service (IMPS), Mobile wallets, Payments bank, Unified Payments Interface (UPI), Unstructured Supplementary Service Data (USSD)/*99#, Aadhaar Pay and Credit cards/Debit cards.

Though we are adopting these modes of payments but least of us are unaware about the costs are attached with it. 

National Electronic Funds Transfer (NEFT) 
NEFT is a payment system enabling one-to-one funds transfers. Individual can use this service either by Internet banking or by going to bank branch. Though not all bank branches are enabled with this service. 

NEFT charges are as follows: 

Real Time Gross Settlement ( RTGS ) 
This is facility only allows transfer of high-value amounts. In RTGS, the minimum transferable amount is Rs 2 lakh. Another problem is fund transfer is possible in from Monday to Saturday.

RTGS Charges

Immediate Payment Service (IMPS) 
This allows the customer to transfer money on a 24×7 basis and 365 days of the year. However, the maximum amount that be transferred is Rs 2 lakh. This facility can be accessed via Internet banking. 

IMPS Charges

Mobile wallets 
Mobile wallets became pervasive during demonetization. Mobile wallets allow payments to be made using smartphone through an app. However, transactions are possible only if the sender and receiver is using the same app.

No charges are levied for payments or adding cash into wallets is a well known fact. But There are certain charges when money is transferred to a bank account from mobile wallet, and this is not known to most of us.

For example, Paytm charges a flat 3 per cent for transferring money from wallet to bank account. Similarly, Mobikwik charges 4 per cent of the transfer amount. 

Payments bank 

Payment banks unlike the usual bank offers partial facilities to its customers which are according to the guidelines provided by Reserve Bank of India (RBI). Airtel Payments Bank, Paytm Payments Bank are some examples. 

Airtel Payments Bank website has a mention that there are no account opening or cash deposit charges but charges are levied on cash withdrawal of 0.65 per cent of the amount. 

Fund transfer within Airtel Payments Bank is free but cross bank transfer comes at a cost of 0.5 per cent of the amount transferred. 

Unified Payments Interface (UPI) 
UPI an instant payments facility has been launched by National Payments Corporation of India (NPCI). It allows the user to send and receive money using a virtual payment address (VPA) without entering additional banking information. Each bank provides its own UPI app. Even the government has its own app called BHIM. 

According to www.cashlessindia.gov.in (a website maintained by the GOI to sensitize people about digital payments and transactions) no charges are levied on transactions made by UPI unless it’s a transfer of funds to banks using IMPS, NEFT or RTGS.

Unstructured Supplementary Service Data (USSD)/*99# 
This is a mobile based banking service offered by NPCI. that can be accessed by any mobile phone user (feature or smartphone). This service also works in areas with zero internet connectivity. 

A minor charge of Rs 0.50 per transaction is charged by the mobile operator. There are no charges on the transfer of funds. However, a maximum of limit of Rs 5,000 a day per customer is allowed on fund transfer.

Aadhaar Pay 
This is a biometric based payment solution which requires the user to remember his Aadhaar number.no additional cost is involved in it. Aadhaar Pay lets customers to transact with merchants either by fingerprints or Iris scan. Aadhaar-linked bank account has to be used to avail this service. We need to enter our Aadhaar number, and provide biometric thumb impression. Although there are no transaction charges, a merchant may get charged based on the banks discretion. 

Credit cards/Debit cards 
This is the most common method of making electronic payments. Swiping cards to make bill payments, buy groceries, book travel tickets and so on is done on a regular basis.There are limits imposed on the number of transactions (financial or non-financial. On exceeding the limit, bank is liable to levy charges . An individual can get eight free monthly transactions (five at his home bank ATMs and three at non- home bank ATMs) in a metro city. Subsequently for every transaction, bank charges Rs 20 per financial transaction and Rs 8.5 for non-financial transaction. 

Credit cards has higher fees and more limits compared to a debit card. Cash withdrawals from ATMs using credit card is also a costly business. As per HDFC Bank’s website, transaction fees of 2.5 per cent, minimum being Rs 300, would be levied on the amount withdrawn. This amount gets added to the card holder’s bill. 

Food for thought

There are no free dines and everything comes with charges attached. Digital payments are definitely convenient and are getting popular and the fees may not seem too much, but over a period of time they can eat into overall account balance. 

With a high number or poor and illiterate beings who are acquainted to trading with hard cash, a cashless society would be a challenge to execute as it would be rejected by almost 50 percent of the Indian masses as they would perceive digital transactions as impractical.

In this situation we even cannot be contingent on transactions done by cheques, because anytime a cheque may bounce which causes loss to the merchant and even fine is levied on the payer.

The main dilemma these days a commoner is facing is if at all GOI is promoting cashless system or digital payment system then how come so much of charges are attached with these payment modes. What options are left for payments to me made. Are we really motivating or demotivating. Can GOI not improvise some mechanism where such costs are not levied at least for the lower valued transactions and also fund transfers.

This is a serious matter to ponder over if we are in reality heading for a digital cashless society.