“The increasing use of technology-based innovative payment products, combined with RBI’s strategic initiatives outlined in their Vision 2018 document, published in June this year, are expected to reduce paper-based instruments significantly and lead to accelerated growth in mobile banking and other modes of electronic payments to make the public go the cashless transaction way.”
Simply put, that’s what cashless transactions are: using various digital means to pay for goods and services. Cashless transactions can be done via POS (point of sale) Card Machines, Cheque, Internet banking (NEFT, RTGS or IMPS), Wallets (such as PayTM, Mobikwik, freecharge) or Unified Payment Interface (UPI).
The recent decision to change the existing Rs.500 and Rs. 1,000 currency notes is a move in that direction with the Government of India sustaining the effort to reduce the dependency on cash based transactions. Of course, there is also the impact on money laundering, counterfeit and black money.
It therefore becomes relevant for us to better understand the various methods of cash less transactions, their advantages and the best way to make cashless transactions part of our day-to-day activities.
Moving towards ‘less-cash’ transactions
Cheque and Demand Draft are alternate modes of payment we already know of. Although Cheque payments take longer than say NEFT or RTGS, it removes the element of cash from the transactions.
New methods of going cashless
The future of cashless payments is Mobile Phone payment methods. Instead of cash, a payee’s mobile phone number can be used to transfer funds or pay for goods.
IMPS (Immediate Payment Service) can be used for interbank transfer of funds and is available at ATM kiosks and on Net banking portals.
NFC (Near Field Communications) is a mode of payment wherein data can be exchanged between smart phones or a smart-phone and a POS and require physical proximity. NFC is faster and more secure compared to short ranged services like Bluetooth.
Wallets: One can receive or pay money through a mobile application and a registered mobile number. The transactions are real time so credit and debit happens simultaneously. The beneficiary doesn’t need a bank account to receive money. Wallets are closed loop i.e once the money is in the wallet (say Paytm) you can’t transfer it to another wallet. But you can transfer to a bank account by paying a nominal fee (typically 1-2%).
Unified Payment Interface: UPI enables immediate money transfer through mobile, round the clock 24*7 and 365 days. To register, download and sign up on the UPI App of your bank and create a virtual payment address (like an email account). When paying simply mention the beneficiary’s virtual payment address to make payment. Transactions are instant just like IMPS. You can also pull funds by initiating a pull request. So if you owe your friend money, he can request repayment through the App and you can approve on your App.
RBI’s Vision 2018
Significantly, the RBI brought out a Vision document for 2018, in which it encourages the use of electronic payment modes to minimize our dependence on cash transactions.
Vision 2018 focuses on five C’s
- Coverage – by enabling wider access to a variety of electronic payment services, the latest being the UPI initiative where you can transfer money using your mobile and your mobile phone number.
- Convenience – by enhancing user experience through ease of use and of products and processes. You can pay for movie tickets through your phone instead of waiting in queues or order your groceries online
- Confidence – by promoting integrity of systems, security of operations and customer protection. Building trust will be key to encouraging usage of the cash less transaction options
- Convergence – by ensuring interoperability across service providers
- Cost – by making services cost effective for users as well as service providers. Like the recent waiver of ATM fees and reduction of card transaction fees. While the former may be temporary, it is hoped that other transactions fees are reduced so as to encourage increased usage
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