Cash, digital will continue to coexist
As the availability of cash in the country improves and the festive fever catches up, auatomated teller machines (ATMS) are back as one of the most important channels of choice for customers to access money in their bank accounts. At the same time, digital transactions such as unified payments interface (UPI) and debit card transactions on point of sales (POS) are also on the rise in both, volume and value. This indicates that individuals are slowly trying out new modes of transactions while continuing to use cash.
How do you decide when to pay digitally and when to use cash? In some cases, it may depend on the receiving party. For instance, the local vegetable vendor may prefer cash, as he may need it to buy a few daily provisions from another small vendor who may, in turn, not be digitally equipped. But if you buy the same amount of vegetables from a mall, you can swipe your debit card or pay through a digital wallet or UPI.
The second aspect to consider is the value of transaction. If it is a few hundred rupees, you will be comfortable paying in cash. If the value of the transaction is in multiples of thousands or higher, it might be more convenient to make that payment via debit card, credit card or other digital options.
The third aspect is the need to leave a digital trail as evidence of transaction. If you are giving a loan to a friend or relative, or repaying a loan, you may want to make the payment digitally so a clear trail is available as evidence. Again, the value of the loan matters here. Small value loans may be made in cash, while large ones are mostly made digitally.
The fourth factor is convenience. Your electricity or mobile bills are best paid digitally, as otherwise you may have to go to the office of the utility service provider and stand in a queue to make the payment. That the value of the transaction in this case generally tends to be low is an irrelevant factor.
There are many other factors that determine digital or cash usage, but the logic remains more or less similar to the ones mentioned above. Going by current trends, it is evident that cash and digital will coexist for a long time, with digital transactions slowly but surely, inching up. And as long as cash continues to be king, ATMS will continue to be the preferred channel of choice. However, did you know that ATMS offer more than just cash? A set of value added transactions are offered: bill payments, funds transfer, donations for social and religious causes, mobile recharge and payment of school and college fees. You can also apply for a loan or credit card through some ATMS.
Many ATMS have also started allowing cardless withdrawals. If you want to send money to a person who does not have an account or ATM card, you can use this option. All you need to do is mention the mobile number and send a request for remittance either through the branch or the internet/mobile banking portal. A code will then be generated in two parts: one part will be sent as an SMS to the mobile number of the sender, while the other will be sent to the mobile number of the receiver. The sender then communicates her part of the code to the beneficiary, who goes to the ATM, selects the cardless option and enters both the codes. If both the codes are correct, the ATM dispenses the amount remitted. This is a convenient option for students, who may not have an ATM card.
Of late, there have been some instances of fraudsters injecting malware in the ATM or a bank’s back-end systems. As a result, ATMS have spewed out money without the bank’s systems knowing about it. The Reserve Bank of India (RBI) recently issued guidelines to banks for upgrading ATMS with the latest operating systems, security applications and encrypting the connections within the network. There have also been instances of vans carrying cash for ATMS being looted en route. A new set of guidelines issued by the Ministry of Home Affairs and RBI need to be implemented. Compliance to them will require a huge investment by service providers and in turn, the banks will need to compensate them for the same.
Radha Rama Dorai is managing director, ATM & Allied Services, FIS