The surge in digital payments in the country, driven largely by short-term incentives, will become sustainable if the costs of making such payments are addressed, said Ram Sewak Sharma, chairman, Telecom Regulatory Authority of India (TRAI).
“Everyone can provide incentives in the short run and see a rise and once those incentives go, they will decline. What is important from a citizen’s perspective is that cash doesn’t have any costs. If I have ₹100 in my pocket, I get ₹100 worth of goods. But if I have to pay somebody ₹1 or ₹2 for paying the same digitally, it’s not fair,” Mr. Sharma said on Wednesday.
Issue of cost
“Digital financial transactions are not sustainable unless you address the issues of cost, convenience and confidence,” the TRAI chief said at the India Digital summit hosted by the Internet and Mobile Association of India.
Referring to the merchant discount rate (MDR) levied on transactions done through credit and debit cards, Mr.Sharma said there is no relationship between the charges and the ‘work done’ to justify them.
“The work at the back-end is almost zero… You are just making some entry into some database that Mr.X transferred some amount to Mr Y. That’s only an entry. No work’s being done,” he said.
Drawing a parallel with the telecom sector, the regulator drew attention to ‘the work done principle’ used to determine how much one operator pays another as termination charges.
“This is computed on the basis of work done. What we are charging in the name of MDR and so on, is not really on the basis of work done. This is an issue that has to be addressed,” Mr. Sharma emphasised.
While people are getting more comfortable with digital payments, the TRAI chief said it is important to build confidence in the systems and ensure that all relevant software is tested for cyber-security and other security risks.
The regulator has reduced the charges of USSD (Unstructured Supplementary Service Data)-based payments made on mobile phones.