India’s cashless proposal could spur mobile payments

MOBILEMAKERS: The Indian government published proposals to encourage greater take-up of electronic payments in a country where cash still rules.It suggested a range of measures, including tax benefits to merchants if at least half of their transactions are handled electronically. Consumers could also receive income tax rebates if a certain proportion of their spend is cashless. Another idea is for government itself to drop certain surcharges it levies for making card payments.Among the objectives are improving financial inclusion, reducing the risks for individuals of carrying cash, cutting the cost of managing cash in the economy, as well as making tax avoidance harder.

Electronic payments include “cards (debit / credit), mobile wallets, mobile apps, net banking, Electronic Clearing Service (ECS), National Electronic Fund Transfer (NEFT), Immediate Payment Service (IMPS), or other similar means”, it said.Possible beneficiaries include Visa, MasterCard and American Express, as well as domestic competitor RuPay. In addition, leading operators Bharti Airtel and Vodafone, as well as newcomer Reliance Jio Infocomm [1], will also look to take advantage.Earlier this year [2], Vodafone, Idea Cellular and Reliance Industries all applied to become so-called payments banks — cutdown versions of traditional banks which the Indian government hopes will boost financial inclusion.As well as encouraging users to make electronic payments, the government wants more means to accept such transactions.It would like greater deployment of point-of-sale (POS)/mobile point-of-sale terminals, which represent only a small percentage of total debit/credit cards in circulation. “Therefore mandating banks issuing cards to deploy POS terminals in a prescribed ratio could be considered”, said the proposal.Other ideas include authorising non banks to install white label POS terminals, in the same way as ATMs. Or boost broadband connectivity to enable mobile payments on a wider scale.Another proposal focuses on mobile payments. Currently operators levy USSD charges of INR1.5 per transaction for banking or payments via mobile phone. “To enhance adoption of mobile banking/payment, the USSD charges could be examined and rationalised,” it said, without explaining what this might involve.Another idea under consideration is making changes to the regulatory regime to promote mobile based payment systems.