Why drastically shrinking cashback scheme for digital transactions is a bad move?
Monday, July 16, 2018 IST
Drastically shrinking the cashback scheme for digital payments is a bad move, will prompt return to cash.
With cash back to pre-demonetisation levels, you would think the government would be thinking of ways to drive up digital payments. After all, the Watal committee report talked of DeMo aiming to bring down cash-GDP ratio from 12% to 6% within three years. Though a high cash-GDP ratio is not always an indicator of a large illegitimate economy, the government was happy to push increasing adoption of digital payments as a goal of the currency ban. Given the electronic trail digital transactions leave, they are indeed desirable. So, it is difficult to understand why the government would have went ahead and limited cashbacks on digital payments on the UPI platform to Rs 150 in an user’s lifetime from Rs 750 a month. To be sure, there are people gaming the system and the government has already spent Rs 1,000 crore on cashbacks in the just the last three months. However, drastically reducing incentives for the entire user base instead of cracking down on the cheats—the government has enough bandwidth to sieve legitimate transactions from the fraudulent ones—will end up discouraging digital adoption.
What is also disturbing is that the cashback scheme is now only available for the BHIM app, and not to banks’ UPIs that were covered earlier. It is true that the government will have to push BHIM adoption since that has not really taken off. But queering the pitch for banks’ UPIs in the process is not the way to do this, since the larger digital payments ecosystem is dependent on wide reach, through multiple platforms. This is not to say that the cashbank incentives should continue ad infinitum, but a sunset clause should have been worked in instead of a knee-jerk repsonse. For instance, the government could have identified those users who have received cashbacks beyond a certain cap and gradually shrunk the cashbacks for them while letting the new users benefit. After a certain metric of usage (including number of users and transactions, apart from transaction size and overall amount transacted) had been achieved—and not just in person-to-person transfers—the government could have ended it entirely. The present move is likely to have a chilling effect on digi-pay adoption.
Related Topics
Trending News & Articles
View Top 5 Mobile Chargers in India as on 08 Feb 2023. This rundown is compiled according t...
Recently posted . 5K views . 6 min read
The following list of India's Top 5 Mobile Charger manufacture Brand 2019
Recently posted . 3K views . 0 min read
Rolls Royce cars are extremely luxurious. While there are many expensive pieces of equipment in Rolls Royce cars, their most relaxing feature is the silence that ...
Recently posted . 3K views . 2 min read
XUV300 is the latest entrant in the compact SUV segment.
Recently posted . 3K views . 0 min read
More in Electronics & Gadgets
Love fried foods? Who doesn’t, everyone loves to enjoy the delicious taste of fried dishes, but the consciousness about health sometimes become a barrier. How...
Recently posted. 1K views . 2 min read
The progressing COVID-19 lockdowns and disconnections around the globe have watched a fight royale of video-conferencing applications. We assist you with choosing...
Recently posted. 1K views . 1 min read
With 8.5 million day by day transactions on its platform, Paytm on Thursday exuded confidence that the virtual charge enterprise will quickly overtake the cumulativ...
Recently posted. 777 views . 10 min read
Recently posted . 1K views
Recently posted . 1K views
Recently posted . 2K views
Recently posted . 3K views
Recently posted . 2K views . 74 min read
Recently posted . 1K views . 123 min read
The company which started off as a Flagship Killer and offered premium hardware experience
Recently posted. 864 views . 0 min read
• Bajaj Chetak has a running range of about 95 km per charge
• Bajaj Auto also sa...
Recently posted. 891 views . 1 min read