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Transaction Size For Digital Payments Falls After Demonetisation But That’s A Good Thing

The transaction size for mobile banking transactions halved after demonetisation.

A worker demonstrates a mobile payment system at the Visa Inc. stand at the Mobile World Congress in Barcelona. (Photographer: Pau Barrena/Bloomberg)
A worker demonstrates a mobile payment system at the Visa Inc. stand at the Mobile World Congress in Barcelona. (Photographer: Pau Barrena/Bloomberg)

Digital is the new way to pay. In the aftermath of the government’s decision to withdraw Rs 500 and Rs 1,000 notes, cash-strapped consumers are moving to digital payments like never before. The number of transactions through cards, mobile wallets and other non-cash modes have jumped up to three times since November 8 when the demonetisation decision was announced, official data from the Reserve Bank of India shows.

While the number and total value of transactions rose, the average ticket size of payments has come down sharply, signalling that customers are now paying for even small value purchases through digital payment options.

For instance, transaction size for mobile banking came down sharply from an average of Rs 14,500 per transaction in November to just Rs 7,200 on December 11. A similar trend was also visible across other modes of payment such as electronic funds transfer, immediate payment service (IMPS) and the unified payments interface (UPI) as well.

Transaction Size For Digital Payments Falls After Demonetisation But That’s A Good Thing

While the UPI had a slow start due to multiple reasons, its average transaction size was at Rs 3,300 in the month of October. This came down to Rs 2,962 on December 11, according to the payment systems indicator data released by the Reserve Bank of India. Similarly, debit and credit cards saw their average transaction size fall from Rs 1,714 to Rs 1,452 in the same period.

RBI provides daily transaction data for different payment instruments with a one-day lag. This data, however, is only representative in nature as it is collected from a limited number of sources.

Worldline India, a payments processing company that manages a third of India’s 1.5 million point-of-sale terminals, said that the reduction in transaction size augurs well for the digital payments industry as it means that low-value transactions are going up.

The company noticed its average ticket size on credit card transactions fall up to 25 percent in a month, Deepak Chandani, chief executive officer of Worldline South Asia and Middle East told BloombergQuint.

“It’s very good news for the industry as a whole. Average ticket sizes are now roughly 25 percent lower than what they were before demonetisation which means there’s been a huge growth in the number of transactions,” Chandani said.

Worldline India deploys about 50,000 terminals a month in the country, and the company is now gearing up to ramp this up to 80,000 deployments a month as demand and volume of digital transactions have skyrocketed, Chandani said.

Credit card users which were earlier using their cards to buy high value items like consumer durables are now using them for daily purchases like grocery and petrol as well. The demonetisation effort by the government has provided people with an opportunity to try out digital payments. Hence, we observe that the hesitation and apprehension associated with new modes of payment is starting to go away.
Deepak Chandani, Chief Executive Officer, Worldline South Asia and Middle East

Chandani, however, said that the willingness of customers to stick with digital payments once cash returns to the system remains to be seen.

The Indian government is trying to incentivize people to stay with digital payments.

Customers are being offered discounts to make payments digitally, and banks are being asked to deploy an additional one million point-of-sale machines in the next six months. India currently has one of the lowest penetration of card acceptance infrastructure with only 1.5 million devices present for about 70 crore cards.