Infosys Co-founder working to promote use of digital payments

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Technology systems, Innovation frameworks, architecture and infrastructure are mature enough to empower the billion in India to transact digitally. It’s presently a matter of increasing awareness, said Nilekani.

Is India’s economy prepared to shift from cash to a `less-cash’ model and Digital India that the government has been talking about since demonetization?

Yes, says Nandan Nilekani, a name synonymous with Aadhaar, and now member of the Niti Aayog board on e-payments that is working with CMs to promote the use of digital payments systems across India.

In an exclusive interview, Nilekani told that the infrastructure needed to empower more than a billion people to transact digitally is already in place, but unlike the West, where card-based payments are more common, the Indian economy will digitalize through mobile-based payments that are faster and cheaper to roll out. Now, it is a matter of increasing awareness and keeping the transaction charges low, he added.

Right now, only 5% of individual consumption expenditure in India happens digitally. The 600 million debit cards are used mostly for ATM withdrawals while credit cards number merely 20 million. Nilekani said cards and point of sale (PoS) machines have increased slowly because of high maintenance costs.

However, National Payments Corporation of India’s new payment applications are designed to work on all phones–with or without internet–and even without phones. The Aadhaar-enabled payment system for those who don’t have phones is likely to enable digital payments by about 350 million people.

For digital payments to catch on, sellers will need to come on board on a large scale. Nilekani said a blend of low transaction charges and formal sector credit will help. Transaction charges are likely to be low because, unlike the card systems that requires significant investment in PoS machines and other infrastructure, the mobile-based system has no such requirements.

Merchants as of now prefer cash deals to hide their income because their profit margins are inadequate to pay both taxes and the high rates on informal sector credit. But when they accept digital payments, the income trail will make them qualified for credit from the formal sector at much lower interest rates, besides other products like insurance policies. “Credit is the killer app of digitalisation,” Nilekani said.

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Sameeksha Bhardwaj, From ITvoir News Desk

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