How to build a cashless society? Give people no other choice | CNBC Reports


You walk around Delhi and you find signs for these digital payment platforms everywhere. Paytm, Samsung, Mobikwik, just to name a few. The number of digital transactions in India have quadrupled since November last year. Welcome news to a government on a mission to reduce India’s reliance on cash. The 500 rupee and 1,000 rupee currency notes presently in use will no longer be legal tender. Prime Minister Narendra Modi pulled nearly 90% of banknotes from circulation last year. “Demonetization” was supposed to crack down on corruption. The results there have been mixed. But one thing is clear: the historic shake up’s been a big boon to India’s digital economy. Business at digital payments company Paytm jumped more than 400% in the hours after that cash crunch. Its mobile-wallet app allowed users to shop at bakeries, electronics stores, even fruit stands, without bills changing hands. In just 8 months, the company managed to sign up more than 220 million people using Paytm at 5 million shops. Just before demonetization, which was in November 2016, we had 700,000 merchants. Post demonetization, we upped it and then we started signing up to 40 to 50,000 merchants every day. 40 to 50,000? Thousand merchants every day. That surge in growth’s helped Paytm go beyond the digital payments space. It’s expanded its e-commerce business. It’s offering loans and banking. You can even buy gold through Paytm’s “digital gold service” which allows users to buy and sell the precious metal and store them digitally, in a government certified vault. The company sold 50 kilograms of gold in its first month, making Paytm India’s largest jeweler, Everyone in India saves using gold. If they save, they save using gold. So we want to offer digital gold as a product which is available to everyone, that everybody understands. Big name investors have already come calling. Alibaba and Softbank invested more than $2 billion combined. Making Paytm one of only a handful of Indian tech unicorns. But Paytm faces new competition from traditional banks who’ve developed their own digital payments platform. India also has a national ID system called Aadhar that registers people using biometrics. The government assigns an ID number attached to those biometrics and stores the information in a centralized database so people here don’t have to carry a physical ID. So, if you want to buy a SIM card, basically you take it here. The smartphone scans the bar code. Put your thumbprint on this machine, and it’s done. Aadhar isn’t widely used by shops just yet but the government’s registered more than 1 billion people or 95% of the population so far, making it the world’s largest biometric ID system. So can this push to go digital actually lead to a “Cashless India”? What do you think, can India really go cashless? Well cash less. There will be less cash, right. It won’t be zero cash, almost no economy in the world is. In fact, a lot of the cash has already returned to the system and the Central Bank in India is planning to issue new lower denominated bills. That doesn’t mean the government is backing off of those cashless dreams. It’s set out to process 25 billion digital transactions this year, part of a larger goal to transform India into a trillion dollar digital economy by 2022.

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