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Cash Is Culture in India, but It’s Not Going to Be the Future

HIGHLIGHTS

Cash is not just the norm but also embedded in culture
New systems like mPOS terminals are making digital more convenient
Apps like BHIM help bring payments from India to Bharat as a whole

In India, cash is culture. It’s everywhere, inspiring Hindi film songs, being doled out by loving grandparents, occupying a key role in religious rituals, and even fuelling a parallel economy. So resistance to any alternative method of payment is only to be expected.

This is amply evident from the way digital transactions, which had spiked from 672 million in November 2016 to 958 million in December 2016 because of demonetisation, plummeted to 763 million (February 2017) once the new currency came back in circulation, as per RBI data. The latest numbers show some growth, but it’s a far cry from the peak in December even now.

It’s a challenge that Digital India is up for. Driving the shift from cash to digital payments are a host of factors – a huge population of young, aspiring people embracing the digital lifestyle, the “India Stack” of four technology layers (presenceless, paperless, cashless, consent), and a robust real-time payments infrastructure in which the Unified Payments Interface (UPI) is the crown jewel. But beyond doubt, policies such as banning the use of cash for transactions amounting to Rs. 200,000 or more are also making an impact. In his budget speech this year, the Minister of Finance announced a mission tasked with achieving 25 billion digital transactions in the year 2017-18 through various means including Aadhaar Pay, UPI, USSD, IMPS, and debit cards.

payment systems

That’s a tall order for an economy where 98 percent of consumer payments are still made in cash. Before this can happen though, several barriers lie in the way. The “cash habit” is at the top of the list, followed by the complexity of using digital payment methods.

Cash is easy
The second factor is telling. A huge reason why cash still rules as a medium of exchange is that it is simple and convenient. Digital payment mechanisms, which might be convenient in some ways – (they save a trip to the bank and are easy to carry around) – are actually less convenient at the point of use. To understand this, visualise the process of using a mobile wallet – log in, authenticate yourself, scan code, enter amount, authorise payment – and now compare it to the ease of handing out cash.

Currently, there is friction on both sides of the digital payment transaction. The abundance of payment options with their different POS hardware and procedures is confusing merchants, who don’t know where to draw the line. This isn’t making life simpler for consumers either.

Clearly, digital payments must become frictionless before they can find mass acceptance.

mpos machine eze

Technology and innovation can do much to facilitate that. For instance, Ezetap has introduced a mobile-based payments acceptance device that merchants can use for all types of digital payments. Another good example is Tonetag, one of our partner firms, which has found an alternative solution to NFC technology with a communication mechanism that uses sound waves. Merchants can even accept cards in much the same way as before; customers need to authorise the payment like they do with NFC, with a swipe, password or OTP.

Ezetap, Tonetag, and others like them reduce the friction in payments, but they don’t eliminate it altogether. Some other forces need to come together to make digital payments as convenient as cash.

Bharat, and not just India
One of these is the digitisation of low-income consumers, which received a shot in the arm when the BHIM app was launched a couple of months after demonetisation with the goal of enabling those with a bank account but no cards, to make digital payments. Another factor is the growth of e-commerce players, who, by accepting card or wallet payments on delivery, have eased even reluctant cash customers into digital payments. The next level of e-commerce, namely smart commerce, will drive digital payments even higher, using AI and analytics to spur consumption.

bhim full

To see what that looks like, you need only look to Amazon, which has mastered the use of consumer analytics to anticipate needs, personalise recommendations, or simply remind customers of something they had shown interest in.

These forces are still brewing at present. When they take firm hold, India will make more meaningful progress towards digital payments. While the timeline for that is uncertain, once the conditions fall into place, the shift from cash to digital will be swift and irreversible.

Venkatramana Gosavi is Senior Vice President and Regional Head, Infosys Finacle, and has been working with Finacle for over 15 years now.

[“Source-gadgets.ndtv”]

Cash Is Culture in India, but It’s Not Going to Be the Future

HIGHLIGHTS

Cash is not just the norm but also embedded in culture
New systems like mPOS terminals are making digital more convenient
Apps like BHIM help bring payments from India to Bharat as a whole

payment systems

Clearly, digital payments must become frictionless before they can find mass acceptance.

mpos machine eze

bhim full

Venkatramana Gosavi is Senior Vice President and Regional Head, Infosys Finacle, and has been working with Finacle for over 15 years now.

[“Source-gadgets.ndtv”]

SoundCloud Says It Has Enough Cash to Last Until Fourth Quarter

SoundCloud, the world’s biggest music-streaming service, is still struggling to find a business model – it now has enough cash to last until fourth quarter, after laying off 40 percent of its staff, a representative said on Thursday.

The Berlin-based start-up is different from rivals Apple, Spotify, and Amazon in that it relies more on amateur musicians, for whom it provides a rare platform, and less on major commercial artists.

But like them, it has yet to turn a profit. The big music labels on which most of the services depend – themselves under pressure from the shift to digital music – strike hard bargains.

And SoundCloud – which said three years ago it had an audience of 175 million, a figure it has not updated – lacks either Spotify’s large base of paying subscribers or the deep pockets of Apple and Amazon that can subsidise their music services.

Last week, SoundCloud said it was firing 173 staffers and closing its London and San Francisco offices to focus on Berlin and New York. “We’re on our path to profitability and in control of SoundCloud’s independent future,” co-founder Alex Ljung wrote in a blog post.

Technology website TechCrunch reported, however, that staff were told at a meeting this week that the layoffs only saved the company enough cash to hold out until the fourth quarter.

A spokeswoman the SoundCloud declined to comment on the TechCrunch article in depth. She did say, “SoundCloud is fully funded into the fourth quarter. We continue to be confident the changes made last week put us on our path to profitability and ensure SoundCloud’s long-term viability.”

She declined to comment on funding beyond the end of the year.

The news has reignited speculation that SoundCloud will be acquired by a rival. It was targeted by Spotify last year in a bid that was later aborted.

Spotify, recently valued at $13 billion, is now planning a direct listing on the New York Stock Exchange later this year or in early 2018, sources told Reuters in May.

“The biggest problem I see is that the financial problems will absorb much of management’s time in trying to raise more money, meaning that the real problems of the business go unaddressed,” independent technology analyst Richard Windsor wrote in a note.

“Of all the potential suitors, I think Google makes the most sense,” he said, noting SoundCloud’s similarity to Google’s YouTube in its focus on user-generated content. “Google will probably be most able to monetise what SoundCloud cannot.”

SoundCloud, which was launched in 2008 and has never said how many paying subscribers it has, last month launched a budget subscription package in the hope of persuading more listeners to convert from the free service.

SoundCloud raised $100 million last June from a group of investors including Twitter, valuing the company at roughly $700 million (roughly Rs. 4,510 crores), according to Re/code.

In March, it raised a further $70 million in debt from Ares Capital, Kreos Capital and DavidsonTechnology to meet its expected 2.5 times year-on-year revenue growth in 2017, a company spokeswoman said.

Co-founder Alex Ljung said in a public interview at the Tech Open Air conference in Berlin this week that the company was fundraising, although he declined to comment on a rumour it was trying to raise $250 million (roughly Rs. 1,610 crores).

[“source-gadgets.ndtv”]

FCA warns it may intervene as millions take pension cash early

Many savers are apparently moving money out of pension pots into other savings vehicles, which could be ‘disastrous’. Photograph: Andrew Brookes/Getty Images/Cultura RF

The TUC has warned that millions of workers risk being “plunged into insecurity in old age” after an official report revealed a surge of people grabbing their pension cash early without taking advice.

More than two years after the government brought in a range of pension freedoms, the Financial Conduct Authority concluded that accessing pension pots early had become “the new norm”. The regulator warned that early intervention may be needed to ensure this multibillion-pound market worked well.

The FCA’s study of the retirement market also found that in more than half of the cases where all the money was taken out of a pension pot, the cash was not spent on cars or holidays, etc; instead it was shifted into other savings or investments, partly because of a “mistrust of pensions”.

For many people the freedoms introduced in April 2015 effectively abolished the requirement to convert a pension pot into an annuity – a product that provides an income for life. Instead, older people are free to do whatever they like with their retirement cash – although those withdrawing large sums may well incur a considerable tax bill. Earlier this year it emerged that the reforms had raised five times more tax for the Treasury’s coffers than was originally forecast, suggesting that people were withdrawing larger sums than expected.

The FCA found that almost three-quarters (72%) of the pots accessed since the freedoms came in were held by people under 65. Most are choosing to take lump sums rather than a regular income. Meanwhile, more than half (53%) of the pots accessed had been fully withdrawn.

“Several factors motivated consumers to access their savings early, including a perception that ‘everyone is doing it’ and a general climate of mistrust,” stated the report. Meanwhile, moving cash from a pension into another savings or investment vehicle “can result in consumers paying too much tax, missing out on investment growth or losing out on other benefits”.

The report also found that income drawdown, which allows savers to take out regular amounts of money while the majority of their savings remain invested, had become much more popular. However, the proportion of drawdown plans bought without advice leapt from 5% before the freedoms to 30% now. “Drawdown is complex … There is a question about whether further support and protection is needed to manage drawdown effectively,” said the FCA.

Responding to the findings, Frances O’Grady, the TUC’s general secretary, said: “This is a damning verdict on so-called ‘pensions freedom’. Workers who are facing insecurity in their working lives now risk being plunged into insecurity in old age. Savers are increasingly dipping into their pots early. And others are following the path of least resistance and risk buying rip-off products.”

Moving retirement cash into other investments “can have disastrous long-term consequences”, said investment firm Old Mutual Wealth. Another firm, Retirement Advantage, said that to do this was “frankly bonkers”.

[“Source-theguardian”]