India’s tryst with digital payments has been a mixed bag. Though the volume of digital transactions has risen, the increase hasn’t been able to offset the predominance of cash. The RBI’s Payment Vision Report 2021, however, projects a fourfold increase in the number of digital transactions to 87 billion by December 2021. It is evident that quick, affordable, convenient and secure systems are needed so that digital adoption is speeded up. The recently released report of a panel on the same headed by Nandan Nilekani has proposed a host of measures to strengthen the existing e-payment ecosystem.

Lowering transaction costs is the main thrust. The Nilekani committee proposes that online charges levied by government agencies, for example, be axed. Various other economic agents would need to drive down their fees as well, with merchants induced to compete with one another on this score. For banks, the panel also wants Know Your Customer (KYC) costs eased. Of special significance is a graded tax incentive structure proposed for private companies that go digital in their financial dealings.

Cost, however, is not the only barrier to the wider acceptance of e-payments. Current consumer interfaces are not only complex and unfriendly, some of them have been getting harder to use as more functions get squeezed into apps that operate on smartphones. Safety is the other major worry. Not all operating systems for phones are equally safe, the e-payment ecosystem is new, and not everybody is convinced that hackers will never gain access to their money. While the geo-tagging of transactions, among other checks, may make for more efficient fraud detection, it may also mean greater data linkups at the back end that could open up other vulnerabilities. On the whole, transaction costs, convenience and safety need to find an optimal balance before cash can turn redundant.

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