How Digital Transactions Enable Ethical Business Practices

India is a country where over 95 percent of the total transactions are paid for in cash. While various initiatives taken by the government are slowly moving us towards a Digital India, we have a long way to go to join the ranks of cashless economies like Sweden, Finland, and Canada. There are still a lot of people who are more comfortable reaching out for cash in our wallet to make payments – no matter how big or small.

Problems with Cash

Yes, it is easy to give your children cash to pay their school fees. Yes, it is convenient to offer cash at the supermarket. Yes, Cash on Delivery might be the most suitable online shopping payment option for the sites where you are not sure about the delivery of products. But do you know the kind of challenges cash transactions present? Let’s have a look:

* Cash is anonymous: When you deal in cash, there is no accountability. In the absence of appropriate controls and measures in place (which generally is the case), it gets really difficult to identify the source of a transaction and to track it through the cycle.

* Fraud is easy: The amount of fake money in circulation is unimaginable – in 2017 alone, 762,072 fake noteswere detected. Counterfeit scams are mushrooming, and for the common man, it is not easy to tell the difference.

* Risk of theft: No matter how careful you are with your money, there is always the risk of theft and robbery. So, whether you’ve just withdrawn money from the ATM, or you’re on your way to deposit it at the bank, you always have to be vigilant.

* Difficult to track: In spite of all measures you take to keep track of the money in your wallet, it is easy to lose count, misplace cash, or mix up denominations. How you keep account of loose cash in your wallet?

* Black market: Cash transactions are the biggest contributors to the black market. They are the reason for illegal sale of goods, corruption, inflated prices, and tax evasions.

Benefits of Elimination of Cash

Eliminating cash and moving towards a digital economy brings the transparency needed in the system. The benefits of cash elimination are manifold:

* Monitoring of business dealings becomes easy and convenient (transactions of more than 3 lakh registered companies are under the radar by the government)

* Right beneficiaries get the right entitlements (the government makes direct transfer of Rs. 74,000 crore to the financial accounts of 35 crore beneficiaries annually)

* More tax gets collected (thanks to demonetisation, in 2017, there was an increase of 24.7% in tax returns filed)

* E-governance becomes a breeze (about 52.4 crore unique Aadhaar numbers have been linked to 73.62 crore accounts)

* Money laundering and black market gets minimized (more than 37,000 shell companies engaging in black money and hawala transactions have been identified)

How Digital Transactions AreHelping Curb Fraudulent Transactions

In a bid to move towards a cashless economy, a number digital initiatives have been launched that are helping curb fraudulent transactions and enabling ethical practices:

1. Aadhaar

The Aadhaar initiative, that presents every Indian with a unique digital identity, has enabled welfare to reach the right people. Using their Aadhaar numbers, the underprivileged are getting their rightful scholarships, subsidies are reaching the rightful people (by scrapping over 23 million fake ration cards, the government is saving a whopping INR 14,000 crore in food subsidy every year), pensioners are getting their pensions on time, and the black market of LPG is being curbed (more than 20 million people have given up their cooking gas subsidy for which they were not entitled).

2. Loan Collection

Repaying loan is one of the most challenging tasks for any citizen. While many people look to pay off their debts as quickly as possible, it is sometimes not possible due to an unforeseen event, a financial crunch or an illness. For MFIs, most often loan collection happens through cash. Because of this, there are chances of malpractices in terms of incorrect projections of outstanding. Due to cumbersome processes requiring manual tallying of cash collected and end of day deposit of cash, outstanding collection becomes challenging. By digitalising the loan collection process, repayment statements can be automatically sent to debtors, followed by friendly SMSs which clearly indicate the amount due and the payment dates. Digital loan collection initiatives make loan collection processes easier, quicker, efficient, flexible, and more debtor-friendly. Using UPI/Aadhaar makes loan collection even more friendly in amongst Tier 3/Tier 4 cities where card penetration is lower.

3. Education Fees

Although cash transactions have been the most popular means to pay school fees or make donations, there is no transparency on how the money is accounted for. When donation or fees is paid in cash, there is rarely any clarity on where the money is being used, and where it finally ends up. There is also the issue of taxation, that needs to be curbed. A new directive by the HRD ministry states that all monetary transactions – including student fees, exam fees, vendor payments, and salary/wage payments – have to be done using digital modes of payment. The digitalisation of such transactions will help curb illegal donations, make the admission process more transparent, and enable ethical tax filing.

4. MSMEs

The Micro, Small and Medium Enterprises (MSME) sector in India has primarily operated offline, with a majority of transactions happening in cash.Cash transactions have caused a host of problems for MSMEs including delayed payments, untimely credit, and issues with getting loans. However, now, especially post demonetisation, MSMEs are left with no option but to turn digital. According to reports, as many as 41% of MSMEs said their clients have moved to electronic payments since demonetisation. Electronic payments are now enabling them to reach wider geographies which would otherwise remain outside their scope. As social selling picks up steam, MSMEs have alsostarted operating their businesses through Facebook, Twitter and other social platforms.Having a digital presence is helping MSMEs to expand their markets, safely and quickly process transactions, improve transparency, and enable ethical and legitimate record keeping.

Conclusion:

People prefer cash because it is quick, easy, and convenient. If the digital payment options provide all these benefits, consumers dependence on cash will start to diminish.Countries like Sweden prove that cash-free living is not only beneficial but also desirable. Curbing of fraudulent cash transactions boosts economic growth of the country, and I believe, as Indians, we are happy to contribute towards that.

About Phi Commerce

Phi Commerce creates an ecosystem between merchants and consumers through simple, secure and efficient payment processing which helps commerce to flourish and build lasting consumer relationships. Phi Commerce solutions solve problems in hitherto untapped mass sectors where cash is still the dominant mode of payment.

Underpinning all Phi Commerce solutions is the PayPhi Transaction Gateway, an omni channel gateway which supports various mechanisms of payments such as payments on the go, in-store payments and online payments and multiple payment modes like cards, net-banking, wallets, UPI and BharatQR.

PayPhi eCOD solution provides consumers a simple, safe, anytime / anywhere way to digitally when the goods or services are delivered/rendered. The effective nature of this service has resulted in it being rolled out to consumers of over 220 e-tailers across 5500 PIN codes within 6 months!

PayPhi MerchantPay, an omni payment acceptance platform, allows merchants to accept payment using UPI, BharatQR, Aadhaar Pay without any additional investment in devices. PayPhi MerchantPay can be used as standalone application or can be integrated with the teller systems or delivery/booking apps. Delivery agents of one of the largest LPG refill supplier in the country use PayPhi MerchantPay to enable cash less payment on delivery of cooking gas cylinder.

PayPhi ePay – enables business to send secure collection request to consumer for instant payments. This can be used for both proximity and remote collections.

The core team of Phi Commerce are seasoned payment professionals with more than 150 years of experience in retail payments domain across 25 countries globally.

Jose Thattil
Co-founder and CEO of Phi Commerce