Friday, October 19, 2018


IFMR’s CDFI and IIM-B launch report about behaviour towards e-payments
Wednesday, 08 November, 2017, 08 : 00 AM [IST]
Nandita Vijay, Bengaluru
The Institute for Financial Management and Research’s (IFMR) Centre for Digital Financial Inclusion (CDFI), in collaboration with researchers at the Digital Innovation Lab, Indian Institute of Management, Bangalore (IIM-B) conducted research covering the perceptions, usage and behaviour towards digital payments pre- and post-demonetisation, and marked the first anniversary of demonetisation with the launch of a report, titled Going Cashless? on the latter’s campus recently.

Sixty-three per cent of the retailers across the country may now be inclined to use the cashless system of payment. There is, in fact, a number of rural consumers willing to use mobile payments post-demonetisation. They are on par with their urban counterparts. In locations with moderate consumption levels, there is also a significant increase in shops that are prepared to pay a transaction charge in excess of one per cent.

In fact, almost 38 per cent of the retailers are willing to pay a transaction charge in excess of one per cent. Post-demonetisation, there has been a significant rise in the number of retailers willing to pay a transaction charge in excess of one per cent in locations with moderate consumption levels.

“There is a huge untapped potential for mobile payments at unorganised kirana stores, where most Indians go to fulfill their daily needs. About 94 per cent of kirana shopkeepers own mobile phones. Of these, 41 per cent were smartphones at the time of the study, which was conducted in March 2017,” said Krishnan Dharmarajan, executive director, CDFI.

He added that the recent influx of low-cost smartphones bundled with the Internet should further push the surging interest in digital payments in both rural and urban India. About 80 per cent of the smartphone users use the Internet. This presents a huge opportunity for these retailers to move to mobile payments.

D Krishna Sundar, chairperson, Digital Innovation Lab, IIM-B, stated, “In order to reach closer to a cashless economy, it is important that the number of digital transactions increases across the country amongst all segments and through a variety of payment options.”

“Since one of the main contributors to economic activity and the current cash-based economy is the unorganised retail sector, this is a segment which cannot be ignored in the cashless journey. Our study highlights that there are promising opportunities,” he added.

The Going Cashless study was conducted in two stages – pre-demonetisation (September 2016) and post-demonetisation (between February and March 2017), with the sample of consumers and retailers from 11 districts across India. The report was a spin-off of an ongoing academic study conducted by CDFI, IFMR, and the Digital Innovation Lab, IIM-B on the various factors shaping the usage of cash and digital payments amongst consumers and Kirana retailers.

The key highlight of the report was that more retailers intended to use cashless systems. Consumers’ push and interest in the cashless system, peer pressure and the perceived value of cashless transactions such as convenience etc. are the drivers of this change.

Around 45 per cent of the retailers intend to deploy point-of-sale (POS) machines. The current penetration is about five per cent. Kirana retailers having POS devices, and at least 35 per cent of consumers having access to cards, present a huge opportunity. There is a huge untapped potential for mobile payments.

Young consumers have high access to cashless instruments and are displaying a higher inclination to adopt cashless payments. These young consumers could not only the first adopters, but could also help the older generation to learn and adopt cashless payments.
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