Vinod Kumar runs a tea and a Maggi stall in Sector 16A in Noida. He has Paytm, but he rarely uses it to receive payments from customers and prefers being paid in cash.
That’s because the wholesalers he buys his ingredients from don’t use Paytm. So, Kumar needs cash to pay them.
He, however, has the option of transferring his Paytm credit to his bank account and then withdrawing the money from a bank. But he doesn’t have the time to stand in a long queue. In short, a mobile wallet like Paytm is of little help to him.
After demonetisation, Paytm and other e-wallets have launched an ad blitz portraying themselves as a solution to the cash crunch, especially for small-time vendors like paanwallahs and chaiwallahs. But for someone who needs cash daily, whether for household expenses or to meet work-related expenses, using e-wallets like Paytm is useless. It doesn’t guarantee cash in hand and India isn’t a cashless economy yet.
Going Cashless in a Cash-Dependent Economy Can’t Be a Solution
Paytm and other e-wallets exist in an essentially cash-dependent Indian economy. According to a Boston Consulting Group (BCG) report, non-cash payments in India made up 22% of all consumer transactions in 2015. Interestingly, the report predicts that by 2020, nearly $500 billion worth of transactions in India will happen digitally.
But, by 2020. Not now.
In the short term, it is difficult for small vendors like Kumar to use mobile wallets unless they exist in an ecosystem where everyone else uses them. The Quint asked Paytm on how does a street hawker who doesn’t have access to others using e-wallets convert his credit to cash. Below is Paytm’s answer.
Money accepted using Paytm is stored securely in the Paytm account. While users can transfer this money to their bank account, consumers and merchants like storing money in their Paytm accounts as they can use it at millions of touch-points across the country. Going forward, with the launch of the Paytm Payments Bank, consumers and merchants can also save their money and earn an interest.Deepak Abbot, Senior Vice President, Paytm
However, this doesn’t answer whether there are any alternatives for street vendors, apart from transferring the credit into a bank account and then withdrawing the money.
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Going to the bank means standing in endless queues outside a bank and facing restrictions on the amount of money one can withdraw. So, why should your neighbourhood paanwallah switch to Paytm during demonetisation?
When Going Cashless is a Compulsion, And Not a Choice
With demonetisation, a large number of people in India have been forced to use e-wallets, despite the fact that they might not want to or are unable to. The BCG report says that around 68% of consumers opt for the cash on delivery payment option even when making online purchases. That’s because they are habituated to using cash. For offline transactions, the numbers are bound to be greater. According to latest data from the Reserve Bank of India, banks have issued 25.9 million credit cards and 697.2 million debit cards as of July 2016 against a total population of 1.3 billion.
In any economy, going cashless should be a choice. While there is no doubt that cashless transactions using e-wallets, credit and debit cards are the future, why is a state policy forcibly imposing cashless transactions?
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