A lot of new adopters of digital payments have returned to cash: NPCI official

As per Dilip Asbe of National Payments Corporation of India, new digital payment users went up to 100 million during demonetisation but only 25 million have stuck around


The National Payments Corporation of India (NPCI) continues to push new means of digital payment systems even after demonetisation, in an attempt towards a less-cash economy. Photo: Hemant Mishra/Mint
The National Payments Corporation of India (NPCI) continues to push new means of digital payment systems even after demonetisation, in an attempt towards a less-cash economy. Photo: Hemant Mishra/Mint

Mumbai: As currency in the public hands continues to increase, a lot of new adopters of digital payment systems have returned to cash. Less than half the customers who chose digital payment options during demonetisation continue to use them, said a senior official at the National Payments Corporation of India (NPCI).

The total number of new digital payment users in banking went up from around 40 million to 100 million in the first two months after the government invalidated 86% of the country’s currency in circulation on 8 November. Now, three months after the exercise has ended, only 25 million have stuck around, according to Dilip Asbe, chief operating officer at NPCI.

“So about 25-30 million new customers came in. Obviously more came in, but 25 million have stayed back. If you would look at regular payment system cycle standpoint, it would have taken a couple of years to reach that stage,” said Asbe, speaking at the launch of a unified payments interface (UPI)-based payments for merchants by digital transactions platform Benow.

As on 7 April, currency in circulation stood at Rs13.6 trillion compared to Rs17.97 trillion on 4 November. It had dropped to a low of Rs8.98 trillion as on 6 January following the note ban.

Throughout November and December, various digital payments modes such as national electronic funds transfer (NEFT), immediate payment service (IMPS), mobile banking, UPI and mobile wallets all saw a significant jump in the volume and value of transactions made.

However, by February, as the cash started returning to the system, this momentum slowed and transactions started dipping. In March, RBI data showed a total of 893.9 million transactions; though this was an improvement from February figures, it was still below the 957.5 million peak reached in December. However, the value of these transactions reached Rs149 trillion—boosted partly by increased real-time gross settlement (RTGS) and NEFT transactions for advance tax payments—well above the previous peak of Rs104 trillion in December.

NPCI, on its part, has been pushing new means of digital payment systems. In March, it introduced UPI for merchants as a means to increase the usage of such payments. In a tie up with Reliance Retail and Innoviti, NPCI allowed customers to pay using UPI applications of any bank by scanning a dynamic QR code on point of sale (PoS) terminals. At the time A.P. Hota, managing director and chief executive officer of NPCI, had said that the payments system provider is looking to bring in more merchants on board.

Separately, NPCI is in the process of adding more banks for the Bharat QR code, said Asbe. About 20 banks are currently on board with QR code, a new payments technology. Once this number reaches 30-35, more merchants are likely to be on board.

“I think there is a separate MDR (merchant discount rate) which is being discussed right now, which I heard is closer to 25 basis points, very similar to debit card (transactions) below Rs2,000,” Asbe said while speaking about Aadhaar-based payments which are likely to be launched shortly. However, Asbe added that the MDR charge was still unclear.

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