Indian regulators have done a very good job in ensuring safety and security in electronic transactions compared to other developing countries, according to a senior official of MasterCard India.
“If you look at any research, 55-56 per cent of the people say the number one concern in using electronic payments is safety and security,” Porush Singh, Country Corporate Office for India and Division President for South Asia said in an interview. “If you look across the emerging and developing economies, the biggest compromise is usually on safety and security.
“I think this is one thing the regulators in India and the Finance Ministry have been very particular about,” Mr Singh added. “In everything they roll out, safety and security has been key.”
Financial InclusionSpeaking about financial inclusion in India and the efforts taken by the government in this regard, Mr Singh said that the government has taken several good steps in this regard to incentivise electronic payments such as providing the RuPay debit cards, but that there is still much to be done on several levels—merchant and consumer awareness, and infrastructure addition.
“They (the government) have done a great job in terms of getting the electronic instrument in the consumers’ hands,” Mr Singh said. “The next step is in terms of driving acceptance. We have between 1.3-1.5 million acceptance points, or points of sale. And they are not all unique. Some of them are the same merchant having more than one acceptance point. The Confederation of Indian Traders say there are 57.7 million SME traders. So you can see the gap.”
Then there are the steps that need to be taken to educate people about the disadvantages of cash and the benefits of using electronic transactions.
“It’s about the merchant getting convinced that electronic payments are good, and about the bank providing the required infrastructure in low-cost acceptance solutions,” Mr Singh added.
“At the moment, only five per cent of consumption expenditure is at point of sale devices, the rest is all cash,” he added. “Even if you look at most of the electronic transactions today, most are ATM withdrawals.”
Government PolicyHere, Mr Singh said, is where government policy comes in, giving the example of how up till a while ago hotel payments were made in cash, but now that is not allowed. “The government is making it more and more difficult to use cash, and are also encouraging electronic payments.”
The Controller General of Accounts has directed the government to absorb the additional surcharge on electronic payments made to the government, which were earlier borne by the consumer.
“Previously a lot of these charges were surcharges on the consumer, and there was an incentive to use cash,” Mr Singh said. “Today the government is saying it will absorb the cost.”
One of the major reasons merchants prefer to deal in cash is so they can keep these transactions off their books, thus leading to black money.
“There is a younger generation of merchants coming up that can see they must embrace technology and electronic payments to realise their visions of expansion and growth,” Mr Singh said. “They realise that if they want international business, then they must have clean balance sheets.”
“The market is moving from a time where consumers did not have a choice to where they have a lot of choice,” he added. “They can move on very quickly, and this can hurt business.”
Best PracticesMr Singh also went on to praise the government’s initiative in trying to borrow the best practices employed abroad in spreading electronic payments.
“Contrary to what people believe, the government has been very open about getting ideas from the rest of the world,” he said. “They have looked at South Korea, have conducted independent studies on the cost of cash, have looked at South Africa.”
South Korea, in particular, has much to teach India in this regard, Mr Singh said, since it was plagued with very similar problems to India’s and now has a 60 per cent penetration of electronic payments compared to India’s five per cent.
