May 5 2021: A sample survey conducted by the Reserve Bank of India finds that while there is continued preference for digital modes of payment, cash is still preferred for regular expenses and small value transactions.
Retail payment system in India is undergoing radical transformation due to rapid technological changes and innovations in recent years. A proper understanding of payment behaviour and preference of consumers for various payment methods help in fine-tuning policies to maintain an apt regulatory framework. Against this backdrop, the Reserve Bank of India (RBI) conducted a pilot survey on retail payment habits of individuals in six cities viz., Delhi, Mumbai, Kolkata, Chennai, Bengaluru and Guwahati between December 2018 and January 2019. The objective of the survey was to gauge the retail payment habits of individuals with a focus on their awareness and usage of digital payments.
Consumer payments survey conducted by the Reserve Bank of Australia in 2019 revealed continued decline in use of cash and increased preference for electronic payment modes by consumers .
Participants cited ‘convenience’ as the most important reason for use of digital payments. It indicated ‘debit or credit card’ as the most popular instrument for making digital payments followed by ‘net banking’, ‘mobile banking’ and ‘BHIM UPI’. However, cash remained the most preferred mode of payment and for receiving money for regular expenses; it was followed by digital mode. Participants also mentioned their use of cash for small value transactions (with amount up to `500).
A substantial majority of e participants opined that the use of PIN/OTP for small value transactions for amount up to `2000 made transactions safe, although a few also found it inconvenient.
The most important purpose for use of digital payments by the respondents were ‘shopping’, ‘money transfer’, ‘payment of bills’ and ‘mobile/ TV recharges’. The results further revealed that most of the individuals having bank accounts were aware about digital payments.
There was a lack of awareness on the importance of basic safety norms to be followed for digital modes of payments among certain segments of participants. Around 8 per cent of the participants shared their passwords/PINs/OTPs used for digital payments. More importantly, majority of the participants either never changed passwords/ PINs for their prepaid/debit or credit cards/mobile banking or changed them only when prompted.|
The results of the pilot survey on retail payment habits of individuals conducted in six cities revealed that most of the respondents were aware about digital payments, and awareness was nearly equal among male and female participants. It found that levels of education, levels of income and having bank account play an important role on awareness about digital payments, as observed from the survey. Evaluation of the findings carried out based on Chi-square test and logistic regression methods reaffirmed these observations. The survey found there was a greater need for sensitisation among the public about basic safety norms while using digital modes of payment. The survey results also suggested that removal of certain infrastructure related bottlenecks would help in enhancing the use of digital payments.
Editor: It is worth reminding that the RBI findings though published less than a month ago in April 21, uses data that must be considered data – from a survey conducted in December 2018 and January 2019. The Covid pandemic since March 2020 has dramatically transformed people’s ability to do financial transactions and hence these findings are in a sense suspect must be read with some caveats.
Read the full source document Retail Payment Habits in India - Evidence from a Pilot Survey; RBI Bulletin April 2021; pages 183-192 here