The big pause
Cashout using point-of-sale terminals is yet to fire despite repeated nudges by the central bank, reports Raghu Mohan
Cashout using point-of-sale terminals is yet to fire despite repeated nudges by the central bank, reports
Imagine walking into a store near you and getting cash using your debit card on the ubiquitous point-of-sale (POS) terminal. The idea behind the Reserve Bank of India’s (RBI’S) August 2009 initiative was to reduce the reliance on automated teller machines (ATMS) for smallticket cashouts. This also signalled that cash will continue to linger despite digital modes of payments making strides.
Despite repeated central bank reminders, cash-out at POS has not fired.
In FY09, we had 470,237 POS terminals and 44,857 ATMS; in FY20, it reads 5.13 million and 234,357, respectively. The share of private banks in the deployed POS terminals is 69 per cent with staterun banks at 27 per cent. The top deployers are RBL Bank with a 25 per cent market share followed by HDFC Bank (17 per cent) and State Bank of India (13 per cent).
And to that extent, it’s the commercially savvy private banks which have the lion’s share of deployments. This appears to suggest that the scheme needs a big tweak. Think about it in another way: As of FY20, there were 828.56 million debit cards and only 57.74 million credit cards. The whole idea of increasing the usage of debit cards stands turned on its head — cashout POS is a critical part of the direct benefits transfer (DBT).
To the point, and beside
“It’s essentially a value-added service for merchants. For all high-traffic merchants, this is a diversion from their core business. The incentive for merchants and acquirers is not sufficient to promote this aggressively, especially in an unpredictable regulatory environment,” says Ravi B Goyal, founder-chairman and managing director of AGS Transact.
Goyal’s stance is despite the fact that cashout at POS during the Covid-19 lockdown spurted to 4.09 million transactions in April from 3.37 million in March (latest set of official figures); in terms of value, it was ~111 crore compared to ~110 crore. The higher uptick in transactions relative to its value is a reflection of both the cap on the ticket-size at ~2,000 per day; and that essentials during this period were largely purchased through cash. It made sense to use this route as the transaction fee is one per cent of the amount withdrawn. This is unlike ATMS, where it ranges anywhere between ~20 and ~30 irrespective of whether you pull out ~1,000 or ~10,000 per swipe.
Has the impersonal aspect tripped the concept? “Since the dispensation of cash is replaced with a human (unlike at ATMS), the question is how a transaction is authorised,” says Manish Patel, founder and chief executive officer at Mswipe. It is currently authorised in four ways — through a different type of transaction-identifier on a POS terminal; Aadhaar-enabled payment system (AEPS) enabled POS terminal via biometric authentication; microATMS or via UPI QR. The headache, as Patel explains, is “commercials and regulation differ for all these modes. It has created confusion on which standard to follow or will be the dominant factor”.
To make it work
“For a faster adoption of this model, there is a need to focus on creating awareness among consumers on cash withdrawal from POS machines. This can start with merchants pushing for cash withdrawals,” adds Goyal. What has also not been thought is the supply of cash.
The way it works is as follows: After due diligence, the acquirer bank designates a merchant establishment, and under this model, the limit on cash withdrawal through POS devices is up to ~1,000 per day in tier-1 and 2 cities, and ~2,000 per day in tier3 and 4 cities. (The higher amount permitted in the smaller cities is a reflection that digital payments are yet to gain traction and internet connectivity needs a big legup). Merchants are required to use the cash available with them: received from customers when they sell goods. And for every such successful transaction (cashout), the outlet is settled on T+1 basis by the acquirer bank along with the commission.
“Merchants are reluctant to provide cash, as one may not have enough to disburse at their end. In rural areas, merchants charge a higher fee than specified,” points out Anurag Nigam, head, ATMmanaged services (India and Philippines) at FIS. This is akin to outlets charging you more if you were to make a purchase on credit cards. And he adds: “A peculiar issue persists in rural areas. Villagers generally buy on credit, and their reluctance to withdraw cash from the same merchant stems from the fact that they are asked for past dues to be cleared before handing over fresh cash.”
It’s important to note that unlike ATMS, the scheme is not advertised or visible to the general public. Nor is it available at all POS terminals even as perceptions relating to the safety and security of transactions remain pronounced. Also, the quality and quantum of cash available is questionable.
One way out is for the nearest nodal branch to look at the distribution of smaller denomination currency and coins to merchants. This will also address the issue related to the nonviability of ATMS to dispense smaller denomination notes. This too, does not fully address the fact that it can’t be a 24X7 facility. “Retail shops open at 10 am and close at 7 or 8 pm. They have limited time of work,” says V Balasubramanian, president, merchant and terminal business at FSS. As for its link to DBT, most of the cash withdrawal under it is from micro-atms and ATMS deployed in rural areas. It brings us to the irony: “It (cashout at POS) can facilitate DBT, but has the potential to create the very middlemen it attempted to eliminate. In my opinion, the DBT cashouts are better addressed by ATMS and DBT spends through debit cards,” Balasubramanian added.
The big pause continues.
RAVI B GOYAL
Founder-chairman & MD, AGS Transact
“WHILE WE HAVE OBSERVED GROWTH IN POS TRANSACTIONS AND IT HAS THE CAPABILITY TO AUGMENT THE CASH-DELIVERY BUSINESS, IT’S DIFFICULT TO COMPLETELY REPLACE ATMS GIVEN THAT MERCHANTS HAVE THEIR CORE BUSINESS TO TAKE CARE OF AS WELL”
MANISH PATEL
Founder and CEO, Mswipe
“COMMERCIALS AND REGULATIONS DIFFER FOR ALL MODES OF PAYMENTS, PERMITTING CONSUMERS TO GET CASH FROM A MERCHANT. IT HAS CREATED CONFUSION IN THE MERCHANT COMMUNITY”