Cashless? Get Ready To Be Cardless Too!

In the wake of demonetization and the subsequent cash crunch, digital payments have picked up some steam.

But, what are ‘digital payments’?

A digital payment is the cashless counterpart of a physical payment.

A mobile wallet, for instance, is an app on your smart phone. It is securely linked to your bank account. Just like you carry cash in your leather wallet, you virtually carry cash in your mobile wallet – and use it for daily transactions by transferring money from your ‘wallet’ to the seller’s. No cash needs to physically change hands.

So, what are the existing means of digital payments?

  1. Mobile Wallet apps such as PayTM, Freecharge, Mobikwik, Ola Money, Airtel Money, HDFC PayZapp, SBI Buddy etc.
  2. Unified Payment Interface is a new payment platform developed through a partnership of banks that enables digital payments over mobile phone directly from the customer’s bank account. Customers use their bank accounts, which are linked to the UPI app, to transact. So, instead of having to load money into a wallet and then spend it, the UPI app allows customers to directly mobilise money from their bank accounts. This means that if the money is in a savings account, it continues to accrue interest until it is spent.
  3. UPI wallets such as PhonePe, Pockets, TruPay etc. This is an e-wallet with features from the Unified Payment Interface infrastructure. Customers are not required to transfer funds from their bank accounts but cash-backs and offers can be availed. They offer both Unified Payment Interface and wallet features in a single app.

The government has asked RuPay, MasterCard and Visa to have a common QR code-based payments solution to help shops across India accept electronic payments without a card swipe machine.

You may be familiar with using QR codes as it is present in messaging apps like WhatsApp. With the advent of a common QR code, both cash as well as card payments will be rendered obsolete.

What is a QR code?

QR code, which stands for Quick Response code, is a two-dimensional bar code. In this sense it is similar to the traditional bar codes we see on products, except that it can store a lot more information per unit of area. Users take a picture of the code using an adequate application on their smart phones, which then pulls up information such as a website, pictures, videos, or even contact information.

How will it work for e-payments?

A merchant will display the common QR code and then customers can scan the code using a smart phone app linked to any of the three payments networks of RuPay, MasterCard and Visa. The money will then be directly transferred from the customer’s account to the merchant’s account.

Don’t e-wallets do the same?

Mobile wallet apps have a QR Code mechanism to send money to another user – but it is a closed ecosystem with payments accepted only within the member community of a particular mobile wallet app. Different merchants accept payments from different wallets.

Dubbed ‘India QR’, the common QR code will be platform independent. Customers having any bank account can pay to any merchant or trader.

According to a 2015 report, India’s non-banking 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.

About 90% of the workforce works in the unorganized sector and this part of the economy is likely to be affected the most because of the ongoing currency swap.

Signing people up, however, is only half the task.

Getting shops and customers to change their reliance on cash permanently will involve convincing those customers who pay only a few hundred rupees and those without knowledge or resources to open a mobile wallet.

Now, with the increasing bunch of options available, the need of the hour is a single official application that supports all types of payment mechanisms supported by banks, as well as the features available in mobile wallets.

People, both consumers and merchants, will only shift when it’s easier, certain and safe to make cashless transactions.

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Source: Times of IndiaGizbotBusiness Line,, LivemintFirstPost & NDTV.

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