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Digital payment fast gaining currency in towns

Times of India:  December, 2016

Mumbai: As the government pushes for more digital payments, it is not just the metros that are seeing a substantial pickup in card transactions, even small cities and towns are witnessing a strong uptake. 

“The jump in card transaction volume is consistently more pronounced in tier-2 and tier-3 cities,“ said Rajeev Agrawal, chief executive of Innoviti Payments Solutions, which manages point-of-sale ter minals for merchants. He said the increase in digital transactions at these places has been one-and-a-quarter times than in bigger cities. “There has been 150% growth in tier-2 cities and 157% growth in tier-3 cities,“ he said. 

Innoviti works with 50,000 merchants, managing PoS terminals for them in collaboration with six major banks, including HDFC Bank, Axis Bank and State Bank of India. 

Agrawal said the steep increase in card transactions at small cities and towns suggested that a lot of people there owned debit cards, but used those only at ATMs to withdraw cash. “ After November 8, this section of the population has rapidly tipped over to using their cards for transactions and payments directly at PoS terminals from using them as ATM cards,“ he said. 

Pine Labs, another payments service provider, said the highest increase in transactions it witnessed was in Ghaziabad (130%), followed by Lucknow (120%). Transactions increased 117% in Delhi, 82% in Mumbai, 54% in Chennai, 84% in Kolkata and 62% in Bengaluru. Payment companies also pointed out that while typical consumer sectors like supermarkets, movie theatres, restaurants and fuel stations saw a sharp rise in card-based payments, a new consumption point that was gaining ground was liquor. 

“We have seen a three-time jump in card-based transactions at liquor shops, which was a sector that never saw much traction on digital payments before,“ said Agrawal. Industry insiders explained these trends as indicative of the fact that the organised retail sector, which has spread across the country even in smaller cities, is majorly driving card transactions. However, while many small retail outlets are shifting to digital modes for payments, the fear is that once there is sufficient cash in the system, there might be a tendency to move away from digital payments. 

“Tax avoidance is seen as a major reason for merchants preferring cash over digital. Hence, our main concern is that changing the payment habits of smaller retail stores might prove to be difficult. However, the government's steps to have PoS machines installed in small villages is positive and we hope that this will help,“ said an industry insider. “Further, (the introduction of) goods and services tax might help in this case."