A concerted effort by the government and industry to boost digital payments in India seems to be bearing fruit. Latest data from the Reserve Bank of India shows that more and more Indians are now pulling out their debit card to shop while the proportion of transactions done at ATMs is falling. For the first time since demonetisation, more than a third of all debit card transactions were done at point-of-sale (PoS) terminals in April this year.
ATM transactions fell below the 67% mark in April with about 80 crore withdrawals valued at Rs 2.84 lakh crore. Meanwhile, PoS machines registered 34% of all transactions. The only time this has happened in the past was December 2016 - a month after demonetisation when PoS transactions were more than a third of all debit transactions.
The transaction share of PoS has grown from 31% in March to 34% while that of ATMs has seen a commensurate fall. This comes just a month after the release of RBI’s payment vision document which set an objective of boosting PoS debit card transactions to 44% by 2021 to achieve the government’s vision of reducing cash in an increasingly digital economy.
“While absolute cash continues to dominate India’s payment landscape, an advancement in technology and better cost-benefit economics make deployment of POS devices a new business avenue for banks,” Surinder Chawla, head retail liabilities and wealth management, RBL Bank told the Economic Times.
Chawla further added that the bank has more than 7 lakh functional payment terminals across the country out of a total 37.5 lakh terminals deployed by public, private and payment banks.
“We see PoS deployment not as profit-making business model, but more as a tool to increase customer engagement on their primary accounts… Historically, these devices have found more traction in tier-1 urban centres but over the past four years, most volume has been coming from tier-2 and tier-3 cities and also from ecommerce sites,” Chawla said.
The deployment of PoS terminals gathered pace right after demonetisation when both businesses and customers asked for more digital payment options in the absence of cash. In this period, the annualised rate of PoS terminal growth has averaged at 39% year-on-year while barely 7,000 ATMs were added during the last three years. Experts say that the lack of growth in ATMs is because of the rising costs of maintenance.
Meanwhile, a growth in digital transactions portends well for an economy like India where a bulk of retail consumption goes unreported due to cash-based transactions which restricts tax collection abilities of the revenue department.