Digital transactions go down in February as cash returns

The pace of digital transactions has declined from the highs of December 2016 and January 2017, according to data on electronic payment trends released by the Reserve Bank of India.

The value of credit and debit card transactions at point of sales (PoS) terminals had peaked to ~89,180 crore in December 2016. Demonetisation was announced in November. In January 2017, it declined to ~81,712 crore and fell further to ~64,286 crore in February 2017. The number of transactions through credit and debit cards, too, fell from 531 million in December to 346 million in February.

Pre-paid instruments, of which mobile wallets form more than 70 per cent in value terms, declined from a peak of ~11,001 crore in January 2017 to ~9,628 crore in February. The number of transactions reduced from 296 million to 280 million. Mobile wallet spends have dropped substantially — from ~8,353 crore in January to ~6,911 crore in February. The decline in number of transactions was lower, indicating the per-transaction value is becoming lower in wallet spends. Mobile banking, too, declined to ~1,27,993 crore in February compared with ~1,49,818 crore in December, when it had peaked after demonetisation.

What has gone up after the remonetisation exercise is the value of transactions at ATMs. People presumably used debit cards for withdrawing cash at ATMs in February. Debit card withdrawals touched ~1,92,838 crore in February, up from ~1,51,644 crore in January 2016. December 2016 saw ATM withdrawals of ~84,934 crore.

At present, much of the activity on digital banking channels is concentrated in metropolitan and urban areas, said a senior bank official. Unless more merchants and service providers come on board for electronic payments, volumes will move up only slowly. It can change only when the number of POS terminals, physical as well as mobile version, at merchant establishment go up dramatically, the banker added.

The tally of PoS terminals has grown from 1.51 mn at the end of October 2016 to 2.22 mn at the end of February 2017.

Mythili Balasubramanian, executive director (retail banking) at IDBI Bank, said, "The rise in digital transactions in semi urban and rural parts of the country will substantially bring down costs of cash management. The ticket size of transaction is small but volumes are huge. Thus, better digital banking set up in hinterland would help to save costs for both the RBI and banks."