as ess imateConnectivity, security, costs and bitcoin usage

are among the key issues to be resoLved asIndia moves towards a digitised economy.

BY KANISHKA GUPTA

134 BUSINESSTODAY January 15 2017

quantum leap in the same direction soon. What arethe main concerns as usage of e-wallets and plasticmoney multiplies and bitcoins grow in popularity?

CONNECTIVITY AND SECURITYThe first major challenge to taking the cashlesseconomy to every corner of the country is poorInternet connectivity and limited smartphone pene-tration. "The basis of digital currency is connectiv-ity," says Tejasvi Mohanram, founder and CEO ofpersonal fmance platform, RupeePower. "Unless netconnectivity improves radically in rural areas, on-line transactions can never become a way oflife."Not surprisingly, e-wallet companies like Paytmand MobiKwik are trying to overcome the problemin different ways, but as long as connectivity re-mains sporadic or limited, a cashless economy willbe a distant dream. "We have launched a lighterversion of MobiKwik called MobiKwik lite, whichcan even be used by old smartphones with low dataconnectivity," says Bipin Preet Singh, Founder-CEOand Director, MobiKwik. "A mechanism by whicheven feature phones will be able to make paymentsusing SMSs is also being worked on."

A second key concern is security. Reports ofdebit cards being hacked into have raised fears ofpeople losing their entire bank savings. Strict gov-ernment guidelines on security could help allaythem. Multi-factor authentication - in which two ormore pieces of correct evidence have to be providedbefore being allowed access to a bank account -may be cumbersome, but it makes all the difference .to security. But conversely, to encourage the shift todigital banking, it has also to be made as easy andseamless as possible and doing so without compro-mising security presents another vital challenge.Steps like doing away with two factor authentica-tion for low value transactions - say, below Rs2,000 - are rightly being considered.Interoperability of e-wallets, or incorporating e-wal-lets in the unilled payment interface (UPI) of banks,is another means of making net banking easier.

"India is going past the debit and credit cardphase and moving to payments through smart-phones using the QR code or through feature

mobile-based digital payments have beengrowing phenomenally worldwide.Around 23 per cent of global consumershave adopted it, according to surveys,while among early users of smart-phones, the figure is 35 per cent. The

Scandinavian nations - Norway, Sweden and Denmark- as well as the UK, France and Belgium are well on theirway to becoming entirely cashless. Close on their heelsare Canada, Australia and South Korea. India is way,way behind, but with the acute cash shortage followingthe demonetisation decision, it is expected to also take a

January 15 2017 BUSINESS TODA Y 135

phones which work on USSD,"says Sunil Kulkarni,Deputy Managing Director of e-wallet company Oxigen."It is expected that by January 2017, there will be justone ORcode forRuPay, MasterCard, Visa and Oxigenwallets. Digitally enabled payments using biometric au-thentication will bypass the card system." All this willmake the shift to a cashless economy easier.

As the number of online transactions, and indeed ofbank accounts, increases rap-idly following demonetisa-tion, it is crucial to have ad-equate infrastructure tohandle the load. It is a lotlike demand forecasting -the likely growth has to beanticipated and preparedfor. The system has to besuch that capacity in-crease can be fast andseamless. "Developedcountries already have therequired infrastructure forhigh transaction volumesin online banking," saysMohanram. "We need tolook at those. It is just aquestion of having theright set up." MobiKwik isalready making prepara- 'tions. "We have readiedour systems to seamlesslymanage transactions forup to 300 million users,"says Bipin Preet Singh.

venience of using cards or e-wallets outweighs thesmall additional expense," says Mohanram.

In any case, card charges in India are one of the low-est in the world. The government is also trying to comeup with incentives to encourage cashless transactions.With 90-95 per cent of transactions below ~2,000, thereis a proposal to keep charges for such transactions at 0.5per cent and for those below U,OOO at 0.25 per cent. "At

present, the cash component ofIndia's $1.3 trillion economyis 95 per cent," saysKulkarni ofOxigen. "Aroundfiveper cent of this, or $65billion, is now expected tomove to the digital stream.This is huge, consideringthe entire e-commercebusiness in the country isworth around $20 billion."

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BITCOIN USAGE"Ifthe smartphone is thekey in the formal net bank-ing world, the virtual cur-rency, bitcoin, will play amajor role in the informalworld," says Kulkarni. Buta lot of spadework remainsto be done in India beforebitcoin usage becomeswidespread. "Some of themajor factors that need tobe kept in mind regardingbitcoins are rules relatingto foreign exchange trans-fer and remittances," saysSathvik Vishwanath, Co-founder and CEOofbitcoin

company Unocoin Technologies. Proper documentationof the identity ofbitcoin users is another aspect. The gov-ernment needs to issue proper guidelines on it to bitcoinexchanges as well as set up a regulatory framework."The bitcoin wallet industry is evolving at a franticpace," says Sandeep Goenka, Co-founder and ChiefOperating Officerofbitcoin company ZebIT Service."Since bitcoin is an open network like the Internet, inno-vation is happening on a global scale." Some, however,wonder ifbitcoin usage can be regulated at all. "Tryingto bring guidelines into such a decentralised system asthe bitcoin industry is never going to work," says MohitKalra, Founder and CEOofbitcoin company,CoinSecure .•

The Centre has given incentivesto encourage cashless

transactions, including nominalor no charges for transactions

of ~2,OOOor lessCOST FACTORThere are two major'charges' associated withdigital currency. The flrst is the cost of owning it. Thiscould be in the form of annual fee for credit/ debit cardsor e-wallets or the card swipe machine. Currently. e-wallets and debit cards are free. and so are some of thecredit card variants. The second is the transactioncharge, with payment networks like Visa andMasterCard charging between one and three per centon each transaction. While high margin businessessuch as shops in malls absorb this. local kirana stores-once their use of card swipe machines or e-wallets rises- could well pass this on to the customer. This in turnwould prompt the latter to prefer paying cash."Transaction charges cannot be completely done awaywith. but they should be kept low enough that the con-

136 BUSINESS TODAY January 15 2017

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