Government of India is into a unique activity. It’s keeping a day to day track on progress in digital payment transactions in the country. Interestingly, all banks and financial institutions operating here have been given specific targets to accomplish in a given time frame. In order to monitor the growth of digital payments, Ministry of Electronics and Information Technology (MeitY) has developed “Digidhan Dashboard”, a platform for accurate reporting, monitoring and analysis of all digital payments transactions occurring in the country.
In this financial year (FY2018-19), the Government has set the target of 3000 Crore digital payment transactions to banks and digital wallets. In last financial year (FY2017-18), all banks and financial institutions together had recorded 2070.98 Crore digital payment transactions. According to “DigiDhan Dashboard,”, total digital payment transactions from April, 2018 were recorded by all banks together at 761.03 crore as on 13-08-2018.
Basically, ever since the demonetization of high value currency notes on November 8, 2016, digital banking is fast assuming significance as the government has been vigorously pushing for digital payments. In the process, digital payment channels like mobile banking, e-banking, credit & debit cards, point of sale machines, electronic funds transfer through National Electronic Fund Transfer (NEFT) & Real Time Gross Settlement (RTGS) etc. are fast becoming preferred mode of payment transactions.
Despite the whooping numbers of digital payment transactions mentioned on the Digidhan Dashboard screen, popularity of the digital channels bears question marks as people have been more pushed than motivated to the digital platform with no options but to embrace it. At the moment, it’s the cost of digital payments which remains a major stumbling block for many people to embrace digital methods of transaction.
Before deliberating upon the costs of embracing digital mode of transactions, let’s first have a look at the journey of banking industry from conventional banking to digital banking platform. The concept of computerization has its roots in early 1980s, as the banks wanted to improve customer service. In 1988, Reserve Bank of India (RBI) formalized the concept by setting up a committee on computerization in banks. The committee was headed by Dr. C. Rangarajan.
Banks soon started integrating information technology (IT) into their operations. Initially standalone personal computers (PCs) were used for book-keeping and management information system (MIS) reporting. Then the banks adopted Local Area Network (LAN) connectivity to make the transactions more convenient. With the passage of time and advancements in technology, banks took a big leap and adopted the core banking solution (CBS) platform. It’s here which proved a revolutionary step for the banking industry and changed the whole dynamics of operations of a bank branch.
Before the advent of banking technology, an accountholder was customer of a particular branch where he/she was maintaining the account. Core banking solution changed the status of the customer as it changed his standing from branch customer to bank customer. It’s this Solution which enabled banks to enhance customer convenience through Anywhere and Anytime Banking facilities. Now advancements in CBS technology are fast taking place which are redefining the banking operations with never-seen-before facilities.
However, going digital way doesn’t mean customer convenience alone. Banks too have been garnering lot of benefits in going technology way. Digital payment platform has reduced the cost of transactions drastically and has helped the banks to generate revenue through these multiple channels. For example, according to some statistics available, ‘the cost of a traditional bank transaction at a branch was estimated to be in a range of Rs.70 to Rs.75. Same transaction costs around Rs.15 to Rs.16 on ATM, Rs.2 or less on online banking and Rs.1 or less on Mobile Banking.’
Besides, digitization has considerably reduced human error and has simultaneously enabled a strong reporting system of each and every transaction. Precisely, today banks and financial institutions make it a point to provide fast, accurate and quality banking services to their customers. And, the highest priority for all the banks in the country is digitization driven by latest technology.
Now coming to the issue of major stumbling block in digital payment transactions. Let me quote small but significant incidents of unethical charging cardholders some commission by some merchants. The cardholders are forced to pay 2-3% commission over and above the selling price of purchased goods if payment against bills is paid through credit or debit cards. This is absolutely unethical as well as a criminal act. Let’s also take the case of mobile banking. Even as penetration and usage of the internet on mobiles is continuously increasing, mobile data networks in the country are still unreliable and expensive for some customer segments.
The presence of these loopholes in the system raises eyebrows on the cost of these digital services. This area needs a relook to remove apprehensions of charging the customer unnecessary.
(The views are of the author and not that of the institution he works for)