Cash is the preferred payment mode for a lot of Indians. But why?
Cash Over Digital Payments
According to a pilot survey by the Reserve Bank of India, Indians still prefer cash to other modes of payment despite digital payments picking up pace in the country. Of the entire respondents who were surveyed, around 54% of them said they preferred to make cash payments, while nearly half preferred receiving cash for regular expenses.
Cash payments was preferred mostly for small value transactions between ₹100 and ₹500 while for transactions between ₹500 and above ₹5000, digital modes were opted. Apart from the RBI survey, an October 2020 McKinsey report showed that around 89% of all transactions in India by volume were estimated to be cash-based in 2020, which is down from 100% in 2010.
Talk About Generations
These reports might come as a surprise because digital payments in India is increasing sharply amid the pandemic induced-lockdown. However, the above reports show that cash is still the king in our country.
You might think that Generation X (people who are born from 1965 to 1980) and Xennials (people who are born from 1977 to 1983) might be the ones using cash, but that’s not the case. A survey conducted by FamPay, a neo bank for teenagers, showed that a 67% of teens continue to pay in cash and 52% of teens pay through their parent’s debit/credit card. The cash payments continue despite the presence of neo banks that are available for teenagers.
But Why?
Most of the people like to keep cash in their hands for a number of reasons. The pandemic has pushed many households to keep cash for ready usage. Also, the currency circulation has increased because of the central banks’ liquidity injecting measures. Factors such as ease of usage, easy acceptance, widespread availability and no cost to the consumer make cash a preferred payment option among people.
Apart from the above factors, the RBI report showed that most of the respondents preferred cash because of a lack of internet and point-of-sale infrastructure as well as the complexity of digital transactions and their unfamiliarity with such payment systems. This is why most of the people in the semi-urban and rural areas still use cash.
Zooming Out
India may have a huge love for cash, but a cashless economy has its own benefits. Firstly, the production of coins and paper currency is expensive. So, if we all go electronic, the cost of production gets reduced. Also, the data coming from the cashless transactions can help the government improve and analyse their policies.
But the thing to point out here is that many Indians also support the concept of going cashless. MoneyTransfers.com analysed the latest data from YouGov and found that 79% of Indians believe going cashless would have a positive impact on the country. So, in order for us to go cashless, the government should bring awareness to people about the benefits of going digital and establish a proper infrastructure to support the payments network. This will help in Indian becoming a cashless economy in the near future.
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