Denied access to their own cash, millions of Indians are desperately looking for cashless options to buy essentials and services. Here's how to make the best of a bad job
From Anand Parthasarathy
Bangalore, December 25 2016: In an earlier era, when personal computers were just making their appearance, a much-bandied mantra was the Paperless Office. Corporates as well as government departments made token gestures -- like allowing staff to apply for leave with an e-mail --and extrapolated this to paint a future where paper records would all but disappear. It was all nonsense. Manufacturers of printers attached to PCs, were doing even more business than before. The euphoria about going paperless was replaced with a more realistic goal -- the less-paper office.
We never learn -- or may be the disease is amnesia. The current hype about a cashless society is no less bizarre and unrealistic than an office without paper. Indeed the swift downscaling of the from cash-less to less-cash has taken just weeks rather than months. The less paper concept has taken a quarter century to achieve productive levels in most organizations. Yet here we are, in a situation where 80 percent of our cash has been sucked out , being exhorted to go cashless in almost all our vital money transactions with zero time for preparation.
Is it doable? No, there is no way for a billion citizens to make the change-over to a less cash, let alone a cash-less society in this sort of panic time frame.
Is it bearable? Yes we can muddle through and survive, and may be even experience some of the undoubted efficiencies that electronic cash offers -- at a price.
Yes, a price will have to be paid -- mostly by us, the lay consumers. Too much humbug is being talked about -- mostly by government and the banks -- about how e-money is so much cheaper and risk free.
In his excellent article in Deccan Chronicle on December 21, Mohan Guruswamy exposed that particular white lie or should we be parliamentary in our language and say 'terminological inexactitude'? He explained how a rupee 100 currency note could be reasonably expected to change hands between 500 and 1000 times before it became unusable. The same 100 rupees in electronic form, attracts a charge with every exchange -- credit or debit card charges called merchant discount rates ( 1%- 2%), charges levied by telecom operators and service providers, messaging charges...that Rs 100 generates Rs 1000 - 2000 most of it going to government if we measure over the lifespan of a physical currency. And no prizes for guessing who pays all this -- we the consumers. Traders and service providers will make sure they pass on their portion to us. So we can see why government will be laughing all the way to the treasury even as it pushes us into the sunlit uplands of the cash less digital society.
Since beggars can't be choosers, most of us have been trying to adjust to the new cash-free regime. The exercise can be confusing -- what with banks and payment services bombarding us with in-your-face advertisements about the merit and ease of their particular contribution to going cashless.
If you are a reader of this paper, you are probably among the small minority in this country -- with a bank account; a credit or debit-cum-ATM card; a smart phone and an Internet connection or a mobile data plan. If so, here is a rundown of current and upcoming mechanisms to make (or receive) electronic payments that you should be able to access.
Credit and debit cards: These have been around for 15-20 years so they are mature mechanisms. After India mandated security chips in cards and a second level of authentication -- entering your PIN number when swiping the card or an OTP received only on your mobile phone when using the card online -- this is about as secure as it gets worldwide. But they come with a price. Merchants have to pay between 2% and 2.5% on the transaction value and many pass on this cost to you -- openly or otherwise. When you make online payments for utility services like electricity or telephone bills, such utilities fleece you often charging Rs 50 -Rs 100. Airlines and their aggregators are the worst. They add vague charges to every ticket booked online that range from Rs 200- 300. Post demonetization, many smaller enterprises like courier companies or restaurants, who saw their mostly cash business vanishing, have installed card swipe machines, from newer companies like mSwipe, where the fee is lower -- from 0.75% to 1% for debit cards. These machines are very compact and many pay-on-delivery online groceries have equipped their delivery persons with these machines. You may be charged a fee or not. Either way credit and debit cards are a good bet -- if you can find a merchant ready to take them.|
e-wallets are the answer
What about situations where credit and debit cards don't work? You can do a funds transfer from bank account to bank account using Net banking services like NEFT or RTGS... But the most popular solution is the e-wallet or mobile wallet into which you pre-load some money. This needs to be done by an online transfer from your existing account, using conventional Net Banking. Once your wallet is loaded, you can make payments at merchants, taxis, theatres, restaurants as well as paying many monthly utility bills or recharging your phone.
There are three types of e-wallets:
Closed. This can be used only for one merchant: like Flipkart, OlaCab, Jabong etc|
Semi closed: Most of the popular e-wallets, fall in this category: They work at multiple — but not at all —merchant sites. Each has its distinct and sometimes overlapping client list.. The money in semi-closed wallets needs to be shifted to the wallet before you can start using. Some popular semi-closed e-wallets are listed below.
Open. These are created by banks ( HDFC Chillar, DBS Digibank, ICICI Pockets etc) and additionally can be used to withdraw cash at ATMs through a physical card (hardly a plus point right now!). All of them adhere to government's Universal Payments Interface. Basically the strength of these open bank operated wallets is that you can do person-to-person payments very fast.
Some popular Indian e-wallet apps
Paytm. Possibly the most widely used and has the largest tie ups with merchants
PayUMoney. Offers fixed discounts on payments .Claims over 1 lakh merchants
MobiKwik has recently taken a lot of grocery chains and food outlets on board
Oxigen is one of the first in this business. Money can be transferred to any mobile number — which is great for small vendors and friends.
FreeCharge as the name indicates was primarily a "recharge with benefits" service — but it has expanded into other vendors.
CitrusPay is another combo of payments plus cash transfer service.
This article appears today in Deccan Chronicle
and Asian Age newspapers. Read here
The problem with closed and semi closed wallets is that you have to lock up your money in each of them. In recent weeks, I opened a PayTM wallet with a thousand rupees because that was the only way I could pay for some taxi aggregators like Uber and Meru. But Ola Cabs has its own OlaPay wallet and I was forced to put another thousand rupees there since at any given time, I don't know which taxi is available. Even this doesn't always work. When I have booked, some drivers tell me they need payment in cash. They too have cash problems so what can I say? I usually get a cab willing to take e-payment after 2-3 attempts.
UPI: Government launched the Unified Payment Interface in August this year with great fanfare. Each bank has been allowed to launch its own UPI app which empowers a recipient to initiate the payment request from a smartphone. It facilitates a "virtual payment address" as a payment identifier for sending and collecting money and works on single click 2 factor authentication. The problem has been that banks have not been falling over themselves to launch their UPI app and push customers towards their own open e-wallets where they stand to make more money.
Confusingly, there is another offshoot of UPI called National Unified USSD Platform (NUUP) where USSD is Unstructured Supplementary Service Data. It is meant for those who don't have a smart phone and hence no Internet. You have to dial the USSD code from an ordinary non-smart phone, *99# to access various banking facilities including payments, provided you have pre registered for the NUUP service. You also need to know the IFSC code of your bank and the beneficiary account number and IFSC code of his or her bank. How many small traders will share their bank account number and the bank's IFSC code if you are buying something for Rs 50? Let's get real here!
Recent e-payment solutions
Using QR Codes: Mastercard the global payments leader, brought the QR or Quick Response code version of their Masterpass payment technology to India -- offering yet another option for customers with bank accounts to make cashless payments at suitably equipped points of sales. using just their mobile phones. Ratnakar Bank Limited (RBL Bank) is the first bank in India to integrate the Masterpass QR service into its mobile platform, the OnGo digital wallet
Masterpass QR works for the customer who launches his smartphone application that has been enabled for Masterpass QR; scans the merchant QR code displayed at merchant point-of-sale; enters the transaction amount to initiate payment; confirms the transaction with a PIN; receives instant confirmation of successful funds transfer; collects goods when merchant receives payment notification
Using sound: A Bangalore-based start -up, ToneTag has launched a cashless payment feature that doesn’t require Internet connection.The firm has introduced a technology that uses ‘tone tag’; a term for audio signals, which enables exchange of information between two devices. This doesn’t require any software set-up and is a hardware independent feature that will work on any device, be it a laptop, feature phone, smart phone, tablet, etc. the only criterion is that the device should have a micro-phone and a speaker. All a consumer needs to do is dial a toll free IVR number and bring his device close to the merchant’s ToneTag enabled device, confirm the payment amount and enter his banking pin to transfer funds. Once this is done the device pays a loud beeping tone for about 5 to 10 seconds and the information is transmitted from the customer’s device to the merchant’s device. The technology is now available and can be accessed by dialing a toll free number: 180030101887. Some of its current tie-ups include YES Bank, and ICICI Bank.
Instead of bending on banks to consolidate rather than compete -- and come up with one simple e-wallet app the government has now gone in another direction and today ( December 25) is poised to announce yet another payment option based on Aadhaar which will eliminate fees to intermediaries. The app can be used to make payments even without a phone but it will require the merchant to install an Aadhaar authentication device like a finger print or Iris scanner.
These are too many solutions competing with each, none of them with sufficient traction except possibly the popular mobile wallets which extract their own price. Many of the big banner concessions in fees, being announced are very temporary and will vanish pretty soon.