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The Reserve Bank of India (RBI) on Tuesday said that to maintain the momentum gained by digital payments due to the Covid pandemic, it is important to focus on cyber security, customer protection and cost-effectiveness. In a study paper published on ‘Cash versus Digital Payment Transactions in India’, the Reserve Bank said that despite the importance of cash as a means of transport, cash transactions are declining and digital methods of payment are increasingly being used. In line with global trends, the demand for currency in India also rose temporarily due to the Covid pandemic. The main reason behind it was that we needed to keep some cash as a precautionary measure.
According to this study paper, to maintain the pace of digital payments during the pandemic, efforts are needed from both the demand (customers) and supply side (merchants and intermediaries) to establish affordable payment methods and related acceptance infrastructure. In addition, it is also important to ensure everyone has access to a smartphone and the Internet.
Also read, RBI Report: Fraudsters target digital payments, fraud cases rise in banking sector, amount halved
Sakshi Awasthi, Rekha Mishra and Sharat Dhal, associated with RBI’s Department of Economic and Policy Research (DEPR), prepared the study paper. He says that along with promoting financial inclusion and financial literacy, cyber security and consumer protection also have to be addressed.
The trend towards digital payments has increased but the importance of cash remains
Accordingly, despite the growing trend towards digital payments, cash remains important due to people’s strong tendency to transact and save in cash. Apart from this, cash acts as the de facto basis for all types of payments. “The success of digitization not only replaces cash, it has wider implications for economic growth, development of financial markets, financial health of households and effective governance,” he said.