Instant transfer directly to bank account is the biggest plus point of using UPI, compared to other cashless modes.
We all remember the horror stories of having to stand in serpentine queues to deposit/withdraw cash after the government announced note ban in November, 2016. While an event of that scale is unlikely to happen in future, you could find yourselves in long queues at Automated Teller Machines (ATMs) or your bank branches, once again.
The Confederation of ATM Industry (CATMi), the apex body of the domestic ATM industry, has said that 50% ATMs (i.e. 1.13 lakh approx.) in India are expected to close down across the country by March 2019. The country has approximately 2.21 lakh installed ATMs as on September 2018, according to Reserve Bank of India (RBI).
Sapna Tiwari, Co-founder and COO, Rupeewiz Investment Advisors said, “If and when that actually happens, several people may find their neighbourhood ATMs shutting down and people waiting in long queues to withdraw money.”
The CATMi says that it has become more expensive for ATM firms to manage their ATMs as RBI has asked them to upgrade their technology and deploy additional security.
“This is something which needs to be worked out between banks, ATM operators and the regulators. We all need to come together and find a solution to this problem,” said Navroze Dastur, Managing Director at banking Solutions Company, NCR India.
While the regulatory costs may be an added burden, the underlying problem of stagnant revenues has existed for some time now. Dastur says that the interchange fees — the fees that a bank pays to another if its own customer uses other bank’s ATM — has been stagnant. “The industry has been demanding a hike on interchange fees, but the banks have been resisting.”
If ATMs do shut down, some of us are likely to be more prepared to go for the alternative mode of making payments than we were during note ban period. Many, of course, could find themselves in long queues, all over again. Nevertheless, it makes sense to see, once again, our options if we need to go more cashless than ever before.
Let’s look at popular cashless modes of transactions which can be easily adapted as per your suitability:
i. Internet banking
At the very least, there is the age-old internet banking platform that all banks offer. Instead of paying cash, you can use your bank’s internet banking services to pay utility bills, transfer money, etc.
Depending on the amount you wish to transfer, you can use methods within internet banking such as National Electronic Funds Transfer (NEFT), Real Time Gross Settlement (RTGS), Electronic Clearing Services (ECS), and Immediate Payment Service (IMPS). Using NEFT, RTGS and IMPS, you can transfer money from one bank account to another.
Under NEFT, the transactions can be initiated and settled from the bank account of one particular bank to another bank’s account across India at no additional cost apart from the standard charges.
“One of the advantages of using NEFT is the cost-effectiveness, an individual can carry out smaller value transfers without worrying about the transaction fee and service charges which is nominal,” Tiwari of Rupeewiz Investment Advisors said.
Some of the banks have their own policies concerning the NEFT service provided by them, this includes restrictions on transferring funds immediately to a newly added beneficiary restricting value of transfer beyond a specified limit in certain transfers, etc.
RTGS is a step ahead. In RTGS transfer happens on real time basis and is meant for high-value transactions, i.e. minimum Rs 2 lakh and maximum Rs 10 lakh. As soon as the transfer instructions are sent, the fund gets settled almost immediately. It is efficiently used in situations where individuals and businesses require immediate settlement of high-value funds that are well within the specified limits. Dinesh Rohira, CEO at 5nance said, “Speed and reliability make RTGS as one the most-sought medium of online fund transfers.”
IMPS functions 24/7 allowing a fund transfer at any time of the day. Similar to NEFT, IMPS also allows transfer of low value-funds but what makes it unique is, it immediately settles the funds. Navin Chandani, Chief Business Development Officer of Bankbazaar said, “IMPS functions as more or less the combined version of NEFT and RTGS, where remitters are neither worried about the size of the fund and service availability nor do they have to be concerned about the settlement speed.”
You can also use internet banking to send or receive periodic payments. ECS facilitates paperless credit / debit transaction directly linked to your bank account. Through ECS debit facility you can pay all your utility bills, mutual fund (SIP), insurance premiums, loan instalments, credit card payments, etc.ii. Mobile banking
With growth in use of mobile handsets, people have shifted from internet banking to mobile banking due to handiness. Using mobile banking customer can access all the facilities provided to internet banking user.
The key difference between mobile banking and internet banking is that to use mobile banking user needs to download an application on the smartphone or tablet, whereas internet banking is accessed through a browser and bank website on desktop / laptop.
But it pays to be a bit careful. Chenthil Iyer, SEBI Registered Investment Adviser of Horus Financial Consultants said, “Avoid using internet banking and mobile banking facilities at public places where free wireless internet facility is provided. There is high probability of your bank account getting hacked / login details leaked.”
Further, don’t save your bank login and passwords, credit and debit card details on smartphones, tablets or laptops without a password protected file in your laptop if you must. In case of losing these gadgets your bank account could be accessed by a theft.iii. Mobile wallets
Going cashless works well if you’re allowed to shop without carrying all that cash in your wallet. Here’s where mobile wallets come in. Subscribe to a mobile wallet of your choice, load it up with cash and then you’re ready to shop. You don’t need to carry a credit / debit card or cash while going for shopping when you have sufficient amount in your mobile wallet.
Tiwari said: “Mobile wallets offer security as the details of your credit / debit card and bank is encrypted. These details are not accessible to others while paying / transferring an amount.”
Also, there are discounts and cashback offers to pay for utility bills, book your travel (air, train, bus tickets, hotel), etc. using mobile wallets which is not available in internet and mobile banking.
Here too, it pays to take precautions. The major risk associated with using mobile wallets is privacy of the data. Iyer said, “This is a recurring security concern wherein several mobile wallets do not automatically log the users out. So, anyone having access to the mobile phone can make financial transactions using these mobile wallet apps.
One can also access to saved debit / credit card details and personal information from the mobile wallet apps.” This risk is higher if the user loses her/his mobile phone or the mobile phone is kept unattended and unlocked.
Tiwari said, “It’s not advisable to maintain higher amount in mobile wallets. Since, the money is lying idle in mobile wallet and no interest is earned on that money.”
Also, there is lack of clarity on RBI regulations and timelines for digital payment wallets to become interoperable. Wherein, for instance a Paytm wallet user will be able to send money to a MobiKwik wallet user.iv. Unified Payments Interface (UPI)
Now-a-days, UPI is another popular payments system. It is the fastest payments gateway and has been developed by the National Payments Corporation of India (NPCI) regulated by Reserve Bank of India (RBI).
UPI is built on the IMPS technology which enables a user to instantly transfer funds from your bank account to the end user’s bank account through UPI Virtual Address. This is unique ID generated by the bank. Biggest advantage of UPI is you don’t need to remember lengthy bank account numbers, NEFT code, etc while transferring the money. Also, you can transfer anytime immediately since it operates 365 days.
Instant transfer directly to bank account is the biggest plus point of using UPI compare to other cashless modes. However with mobile wallets, payments and cashbacks received stay in the wallet and typically impose a fee if you decide to move this money back to your bank account.Challenges to switch to cashless mode
It’s easier for the younger generation to opt for cashless as most of us use a mobile phone these days. But, too many cashless payment options leads to fear among various users including elderly people.
For instance, Surekha Shah, 67, retired post office agent, residing in Mumbai avoids using mobile wallets or banks UPI app. She has a fear of fraud transactions from her bank account, credit and debit card which are linked.
Also, at her age using such apps for paying or transferring money seems bit complicated. She sensed, “The probability is high of transferring to wrong person using such mobile apps and difficult to recover later. Also, there is a risk of bank account getting hacked which is linked.”
To people who are afraid to adapt to cashless mode of transactions, Rohit Shah, Founder and CEO at Getting You Rich suggested, “Do a sample / pilot transactions with small amounts in your network to know the method. You could also take help of younger generation and use their intellect to adapt cashless modes.”Follow @thanawala_hiral