Cashless in India: How a fintech professional went without using cash for 50 days

By Abhishant Pant

Are you sure you want to do this? Richa, my wife asked as I shared my idea to undertake an experiment in which I will stop using cash and instead use only digital forms of payment.

Colleagues said going cashless in India is difficult and that I wouldn’t be able to manage more than a week.
All this and the fundamental question “As a believer in digitization of cash, am I just propagating the theory or do I really understand the consumer side of story?” With this started the quest to understand “Cashlessness” first hand. In this process many a times the challenges looked insurmountable – but then what is the point of a journey if it doesn’t challenge you.

The first phase of the journey started in Singapore where I travelled without carrying Singapore Dollars and lived without physical manifestation of money for 5 days i.e. paid for every transaction using card (and it was not easy as every time I boarded a cab or entered a restaurant I had ask if they accept card) and then as I completed the phase, a friend posed the same question “Singapore is a city nation. Do you think you can live without cash for a month in India?”
Thus on 13th March 2016 started “Living without cash” journey in Mumbai. The adventure involved:

Digitization of all cash transactions
* Taking all forms of transport from auto (Jugnoo, OLA, ONGO), taxi (UBER/OLA/Taxi for Sure), Mumbai local (Unreserved Ticket), NMMT Bus, Hirkani (Bus from Pune to Mumbai) and Kaali Peeli (regular black and yellow cabs)
* Identifying a barber (within regular cost)
* A long walk when my mobile got switched-off (Once had to walk for 8 KM on way back from my office at BKC)
* Giving up on “Tapri Ki chai”(masala tea from a local tea stall)
* Convincing the entire family of my maid that I will pay her salary- just that it will go into her bank account rather than in cash.
* Pre-payments to my laundry man, vegetable and newspaper vendor to prove that I mean business.
* Long conversations with neighborhood Kirana stores on benefits and challenges of cashlessness

Overall the journey was made possible by the App-onomy (App-Economy) created by nimble start-ups (PayTM, Jugnoo, Ola, Uber, Big basket, Little, Foodpanda, Taskbob, Ziffi, Natures basket, UTS) who provided great support and took care of all retail financial transactions.

Key Learnings
Below mentioned are the key learnings in brief from 40 days of cashless journey

1. Transit (Mass + Personal) will be the anchor driver of cashless (atleast in Top 10 cities): Auto+ cab (Radio+ UBER/OLA + Black and yellow) +Bus + train (Local + Metro+ Monorail). Because of Its low ticket size but high frequency and high impact. The one who wins this will win consumer mindshare and wallet.

Singapore (My MRT Card), Hongkong (Octopus) and London (Oyster) are clear example of how a transit solution can help in catalyzing the creation of cashless ecosystem. In cities like Mumbai wherein daily commuters take multiple means to reach workplace, transit is one solution that impacts them the most.

Personal transit (App driven) is leading a part of the financial inclusion journey with direct bank account credits to the drivers’ account. These account credits also help in creating a transaction history which helps the bank in assessing the “Ability to Pay” and could in the future help in them receiving loans, if required.

2. Services: Used a total of 18 services, ranging from grocery to maid’s salary which could be converted to digital with a little bit of effort. With hyperlocal start-ups supporting, getting grocery or veggies delivered at home was not a big challenge.

3. Solution for Bharat (One without data and smart phone): India crossed 1 Bn mobile phones but almost 80 % are not smart phones Clearly, feature phone driven low cost solutions like USSD or STK or thin SIM in open loop network is required to get Bharat evolve and reap the benefits of “mobile first” financial inclusion revolution.

4. Regional Languages: My maid is a Maharashtrian. My grocery shop owner is a Gujarati. My newspaper vendor is from UP. They all need a solution in their regional language. And absence of it acts as one big hindrance on way to adoption.

5. Handholding: Both Bharat and less tech-savvy India need hand-holding at every step to graduate from beginner to domain expert. My maid had never visited an ATM machine in her life, so I had to accompany her to teach her to operate the machine.

6. Sustainable growth of wallets: The current mobile wallet providers flush with VC funds have helped a larger number of Indians adopt a new way of transacting i.e. using data powered smart phones to pay for bills, recharge etc. They have also forced banks to innovate and come up with own wallet solutions with consumer experience and convenience as a center of everything they do. Therefore, it will be interesting to observe how many of them (independent wallet companies) survive when the day to reap benefits of this transition will come.

7. Retail Kirana Merchants: is a tough category to crack. They have multiple questions to solve before embarking on this journey.

Will it increase footfall?
Will it increase more consumption from same consumer?
What is the tax implication and will the above benefits are good enough to overlook tax cost?

8. Street Vendors: None of the current digital cash options are cost effective (Cost of Transaction + Cost of Instrument) enough to work with this segment.

9. Going 95 % Cashless is possible for anyone: Except for point no 8 all other retail consumer transactions can be done by non-cash medium.

So what will happen if all the above retail transactions move from cash to cash-less. As per the USAID Report “Barriers to a Digital Economy”, an overwhelming 97 % of retail transactions in India are in cash. Digitizing payments and moving to a less-cash society will bring the following benefits to the economy

Impact on Underground/Black Economy

Estimates of the size of black economy range from 30 %1 to 75 2% of GDP. Just think of the tax revenue and productive usage this money generated can be submitted. If even 25% ($550 B) of this is brought into the tax net it has a potential (purely on account of blended tax income of $ 75-80 B) to bring millions above the poverty line. Large scale government. schemes like NREGA, NRHM can be funded for over next 10 years by just 1 year of tax revenue emanating from this initiative. Getting rid of black economy will be one of the true manifestations of Swatch Bharat Abhiyan.

1. Contribution to GDP and Job Growth: The latest Moody’s Analytics Report estimates that increased usage of electronic payment methods have added $ 6.08 Bn to India’s GDP between 2011-2015, adding 3.36 lakh jobs in the same period.

2. Cost of Cash: With 76.5 B (2012-13 RBI data) pieces of currency in circulation, the operational cost of managing currency operations (to RBI and banks) is $ 3.5 B. Think of the need to re-issue currency due to wear and tear. However, even bigger is the loss on account of dead cash lying in wallets rather than in an income generating instruments. There is an additional cost in terms of time and effort submitted to withdraw cash. It further places the disproportionate burden on poor due to lack of places to keep and save it securely for future.

3. Leakage in Govt. Subsidy and Welfare Schemes: As per Economic Survey released in Feb 2016, govt. provides approx. Rs. 3.7 lakh cr in subsidy via various programs like fertilizer, food, kerosene, diesel etc. And the survey further builds that a large percentage of this does not go to. Just think of savings (due to reduced leakage, lower administration cost and efficiency of service delivery) if all of this goes directly to the Aadhaar linked bank account. A 2010 report, “The benefits of e-payments to Indian society” by McKnisey predicted Rs 97,000 cr savings due to electronic payments infrastructure.

4. Cost of Liquidity Management: Corporates spend large amount in managing cash in their value chain (Consumer-Retailer-Distributor), if a large portion this goes digital it has obvious liquidity management benefits to all participants of this value chain.

Think of the above benefits and the force of 20 new banks, mobile wallet players, Fintech players and PMJDY! This is clearly a once in a lifetime opportunity to get a billion people under the financial inclusion umbrella sustainably and profitably. The government is already moving to positively impact the electronic payments acceptance both at consumer and merchant level as cited in recent white papers on the subject.

However, not everything associated with a cashless environment is perfect. For example,

1. Oyster card system glitch in London at start of the year 2016. As per BBC, it resulted in 100,000 free rides and GBP 250K revenue loss in just a few hours.
2. EBT System failure in US 2013
3. Belgium card payment network crash in 2013.

These issues pose a serious question and therefore, while we head towards a less-cash and eventually towards a cashless society, the belief is that the system will evolve in such a manner that it will have a robust business continuity and consumer grievance redressal plans to ensure that the benefits outweigh the outage.

Finally, the biggest guarantee of a cash less society is the confidence in an alternative that will be always acceptable, anywhere you go.

So now that you are done with the cashless experiment, what’s Next? My wife asked.

Cashless leads to greater benefits to the excluded then the included, So when you go cashless you impact life’s in more ways than you can imagine. The journey continues… I replied.

– Abhishant Pant is a Payments Professional based in Mumbai and above findings are based on his personal experience of going cashless starting 13th March, 2016.