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Challenges perceived by consumers in cashless transaction
Aslam Hasan
(Research Scholar, Department of commerce, Aligarh Muslim University, India)
Prof. (Dr) Mohd Ashraf Ali
(Department of Commerce, Aligarh Muslim University, India)
Mohd Atif Amaan
(MBA, JSS Academy, Noida, India)
Abstract
Globally, there is a tremendous interest among policy makers, academicians, and corporate to
explore the possibilities of moving towards a cashless economy. However, the challenges
perceived by the consumers cannot be left unconcerned. This study investigates the challenges
perceived by the consumers regarding cashless transactions and to find out the reasons that
cast-down consumers to go for cashless transactions. A semi-structured interview will be
designed to observe the challenges perceived by consumers in Aligarh. The findings will try to
sort out the challenges faced by consumers and make cashless transactions consumer friendly.
Keywords: E-payment, Cashless economy, cashless transaction, Perceived challenges.
Introduction
Over the past several years the communication and information technology specially the
Internet has become increasingly popular. With emerging information technology, the global
economy has changed tremendously and has evolved the new system of commercial
transaction that relies less on cash called cashless economy. On 8th December 2016, GOI
passed an order to scrap the currency note of INR 500 and INR 1000 denomination in order to
combat black money and counterfeit currency. At the same time, the GOI has moved to the
other objective to make the India a cashless economy. Cashless economy does not mean a
total elimination of cash, as money will continue to be a means of exchange for goods and
services in a foreseeable future. It is a financial environment that minimizes the use of physical
cash by providing alternative channels of making payments (Alilonu 2012). Consumers can
make payments over the internet, payment at ‘unmanned’ vending machine, ‘manned’ point of
sale (POS) using mobile phone device, personal digital assistant(PDA), smart cards and other
electronic payment system, including debit and credit cards.
While cash will still remain the preferred means of payment and exchange, other alternative
modes are offered. To dissuade the reliance on cash payment, Government of India has
enforced the daily, weekly and monthly cash limit on deposits and withdrawals. Any amount
above the stipulated threshold is penalized by application of handling charges by banks.
In order to promote the cashless transaction, GOI make available various mode of cashless
transactions. These are
1. Banking card: The wide variety of cards available – including credit, debit and prepaid –
offers enormous flexibility. Banking cards offer consumers more security, convenience,
and control way of payment method. RuPay, Visa, MasterCard are some of the
examples of card payment systems. These cards provide 2-factor authentications for
secure payments e.g. secure PIN and OTP.
2. USSD: The innovative payment service *99# works on Unstructured Supplementary
Service Data (USSD) channel. This service allows mobile banking transactions using
basic feature mobile phone, there is no need to have mobile internet data facility for
using USSD based mobile banking. Key services offered under *99# service include
interbank account to account fund transfer, balance inquiry, mini statement besides host
of other services. *99# service is currently offered by 51 leading banks & all GSM
service providers and can be accessed in 12 different languages including Hindi &
English as on 30.11.2016 (Source: NPCI).
3. AEPS: AEPS (Aadhaar Enabled Payment system) is a bank led model which allows
online interoperable financial transaction at PoS (Point of Sale / Micro ATM) through the
Business Correspondent (BC)/Bank Mitra of any bank using the Aadhaar authentication.
No extra charges are charged by Bank in making e-payment.
4. UPI: Unified Payments Interface (UPI) is a system that powers multiple bank accounts
into a single mobile application (of any participating bank), merging several banking
features, seamless fund routing & merchant payments into one hood. It also caters to
the “Peer to Peer” collect request which can be scheduled and paid as per requirement
and convenience. Each Bank provides its own UPI App for Android, Windows and iOS
mobile platform(s).
5. Mobile wallet: A mobile wallet is a way to carry cash in digital format. You can link your
credit card or debit card information in mobile device to mobile wallet application or you
can transfer money online to mobile wallet. Instead of using your physical plastic card to
make purchases, you can pay with your smartphone, tablet, or smart watch. An
individual's account is required to be linked to the digital wallet to load money in it. Most
banks have their e-wallets and some private companies. e.g. Paytm, Freecharge,
Mobikwik, Oxigen, mRuppee, Airtel Money, Jio Money, SBI Buddy, itz Cash, Citrus Pay,
Vodafone M-Pesa, Axis Bank Lime, ICICI Pockets, SpeedPay etc.
6. Bank Pre-paid card: A bank account debit card is linked to your checking account.
A prepaid card is not linked to a checking account. Instead, you are spending money you
loaded onto the prepaid card in advance. In most cases, you can't spend more money
than you have already loaded onto your prepaid card.
7. Point of sale: A point of sale (PoS) is the place where sales are made. On a macro level,
a PoS may be a mall, a market or a city. On a micro level, retailers consider a PoS to be
the area where a customer completes a transaction, such as a checkout counter. It is
also known as a point of purchase.
8. Internet Banking: Internet banking, also known as online banking, e-banking or virtual
banking, is an electronic payment system that enables customers of a bank or other
financial institution to conduct a range of financial transactions through the financial
institution's website.
9. Mobile Banking: Mobile banking is a service provided by a bank or other financial
institution that allows its customers to conduct different types of financial transactions
remotely using a mobile device such as a mobile phone or tablet. It uses software,
usually called an app, provided by the banks or financial institution for the purpose. Each
Bank provides its own mobile banking App for Android, Windows and iOS mobile
platform(s).
10. Micro ATM: Micro ATM meant to be a device that is used by a million Business
Correspondents (BC) to deliver basic banking services. The platform will enable
Business Correspondents (who could be a local kirana shop owner and will act as ‘micro
ATM’) to conduct instant transactions.
Review of Literature
The use of token-based objects (commodities) as representations of value in commercial
exchanges has been a facet of societies for millennia. Underlying the use of tokens is the notion
that they are a measure of account, and a means of storing and transporting abstract value
(Keynes, 1930; Grierson, 1977; Hicks, 1989; Hoover, 1996).
The form of the token also varies across time and space. Examples include gold, silver, copper,
salt, peppercorns, large stones, decorated belts, shells, alcohol, cigarettes, cannabis, candy,
barley, etc. The use of a transferable ‘token’ originates in the agrarian economies of the
Mesopotamian and Egyptian empires (c.3000 to 500 BC).
According to (Fiallos & Wu, 2005), the arrival of the internet has taken electronic payments and
transactions to an exponential growth level. Consumers could purchase goods online and send
credit card numbers across secure network payments schemes that have been developed.
In 1979, Hirschman lamented the lack of research in the area of payment mode effects on point
of sale purchase behaviour. She suggested that this lack may be due to the assumption that
there are no significant differences among payment systems and that even if there were; the
differences did not affect purchase behaviour (Hirschman, 1979:58).
Soman (2001, 2003) found that the use of prepaid cards (integrated circuit cards, ICC, usually
referred to as ‘smart cards’) increases the amount spent per transaction. However, because the
money is transferred so it can use for a specific purpose there may be an awareness that the
money is ‘spent’. Thaler (1985; 1999) and Gourville and Soman (1998) explain this
phenomenon as pseudo-sunk cost effect.
The availability of credit and store cards predates the introduction of electronic payment
systems. Credit cards were first issued in the US by hotels at the beginning of the 20th Century.
By 1914, large department stores and gas station chains were the first to issue store credit
cards. It was not until the 1950s that third party cards began, first as travel entertainment cards
and then as bank cards (Russell, 1975). During the 1960s Visa and the MasterCard largely
eliminated competition and established the bank credit card industry. In consumer markets, the
introduction and use of credit cards in the 1970s to facilitate exchanges initiated social comment
and research. There was a spurt of interest in understanding by whom and how these cards
were used but interest waned (Schreft, 2006). The advent of automated teller machines (ATMs),
the point of sale electronic payment systems and the introduction of debit and smart cards
rekindled interest in payment mode research.
Debit and credit cards share similar characteristics in terms of accessing a potentially large
amount of ‘virtual’ money with a high degree of security (Mann, 2002). Both types of cards
require dial-up/broadband network for point of purchase transactions to occur. For debit
purchase, money is directly transferred to the merchant bank and money is deducted from
customer’s accumulated funds. A credit card is a revolving credit instrument that does not need
to be paid in full; no late fee is charged so long as the minimum payment is made at specified
intervals.
Although a ‘cashless’ society has a number of advantages, social commentators and
environmental activists have expressed concerns that it would increase overall consumption,
increase personal debt levels, reduce savings and that the resultant ‘over-consumption’ will
have an adverse impact on the society and environment (Nocera, 1994; Libow, 1955; Tilford,
2000; Zavestoski, 2002; and MacDonald Oates, Young and Hwang, 2006).
There is evidence that the type of purchase characteristics affects the payment mode choice-
with infrequently purchased and high value correlating with the use of debit (or credit) cards
(Boeschoten, 1992; Bounie and Francois, 2009; Sing, 2004).
According to Snelders, Lea, Webley, and Hussein (1992) money is a typical polymorphous
concept. It has relevance to many aspects of human activities and so discussion and research
occur in numerous disciplines and across numerous perspectives. For this study, the focus is on
examining how individuals perceive and respond to the tangibility of a payment mode in their
day to day purchases.
Objective of the study
1. To focus on the issues and challenges in cashless transaction.
2. To examine the problems perceived by consumers during cashless transaction.
Methodology
For this study the primary data came from 70 semi-structured interviews. The people involved in
the interview are academicians, students, research scholar, artisans, small shopkeepers and
villagers from urban as well as rural areas of Aligarh. Interviews were conducted by direct
meeting (face-to-face) with the respondents. A list of questions prepared in advance and
shouted directly to the respondents. The consumers are free to answer openly i.e. questions are
open-ended. The average interview time was about 10 minute per person. Information from
other sources (e.g. websites, articles, journal, and books) was also accumulated to substantiate
the primary data.
The information noted down during the interviews was summarized into fewer meaningful units.
On comparing and discussing the identified themes, seven broad challenges perceived by
consumers (Diagram1) emerged from the summarized units.
Challenges to consumers
From the study, we find the following challenges perceived by consumers in making e-
payments. These challenges are grouped into seven factors which include few sub-factors as
shown in diagram1.
1. Security concerns: This is probably the most critical factor that influences negatively the
prospective customers who make payment electronically. Every channel of e-payment has its
own security problems, but it may be argued that when somebody concerns about security in e-
payment then the first that comes to his/her mind is the Internet. This is substantiated by the
numerous articles in the press concerning Internet security breaches. People see and hear
everywhere about hackers, fraud, crackers, computer viruses, identity theft, phishing attacks,
spyware, malware and many more other terms which refer to security issues regarding the
Internet. Nevertheless, it is not only the Internet that is fraught with security breaches. There are
numerous incidents regarding frauds through the use of fake ATM cards, or cases of theft of
identity data through the infiltration of inadequately guarded information systems. The incidence
of ATM, credit, debit card and net banking-related fraud has gone up by more than 35 percent
between 2012-13 and 2015-16 in India, according to country's federal bank Reserve Bank of
India (RBI). According to RBI data, 8,765 cases were reported by banks in 2012-13 and the
corresponding figures for subsequent three years were 9,500 (2013-14), 13,083 (2014-15) and
11,997 (in the first nine months of 2015-16) respectively. India ranked third after Japan and the
US as countries most affected by online banking malware in 2014.
2. Non-familiarity and lack of required technological skills: A lot of bank customers lack the
required skills to operate technologically advanced devices (personal computers and new
generation mobile phones i.e. smartphone) and/or they are not familiar with browsing the
Internet. These people, therefore, cannot benefit from the digital economy. In a move to digitally
empower millions of Indians in rural areas and educate them about how to do cashless
transactions, Ministry of Electronics and Information Technology (MeitY) launched a TV channel
named 'DigiShala'. Ministry of Electronics and IT (MeitY) has launched a new scheme entitled
“Digital Finance for Rural India: Creating Awareness and Access through Common Service
Centres (CSCs)” under Digital Saksharta Abhiyan (DISHA) with objectives to enable the CSCs
to become Digital Financial Hubs, by hosting awareness sessions on government policies and
digital finance options available for rural citizens as well as enabling various mechanism of
digital financial services such as IMPS, UPI, Bank PoS machines etc.
3. Lack of specialized equipment and/or infrastructure: Although many people possess personal
computers and/or mobile devices nowadays, there are much more that do not. Not only must
the potential customer have access to the required equipment, but the required
telecommunications networks must be available and accessible. Such networks have to satisfy
some minimum requirements regarding security, capacity, and bandwidth. Because of
inappropriate connection, sometimes, bank charges double amount in case of delay in
confirmation and transaction failure.
4. Extra Charges: Many people do not want to make cashless transaction because they
perceived the e-payment involve extra costs. Before users can engage in electronic retail
payments, they must invest in devices that give access and then purchase that access to the
networks that constitute the Internet.
5. Lack of grievance body: Prospective customers perceived that no grievance body is available
in case of online fraud regarding their amount. If available, they are not familiar with that so
much. Sometimes the consumer face delay in refund because of unavailability of appropriate
grievance body.
6. Disclosed privacy: Consumers perceived that they cannot hide their information regarding
purchase items and articles. They think that their banks have full knowledge about the product
they bought. They lack trust, how the bank or government would use their private information.
7. Not universally accepted: The main problem of e-cash is that it is not universally accepted
because it is necessary that the commercial establishment accepts it as a payment method.
Diagram1.Factors considered as challenges by consumers in making cashless payment.
Findings
In order to identify and evaluate the factors that keep away the consumers from making e-
payments based on primary data, the respondents were asked to provide the factors that they
consider challenges in making cashless payment. One of the main factors that consumers
regarded challenges is lack of specialized equipment and infrastructure. Only 70 percent
consumers have necessary equipment like mobile and personal computers. 61 percent
consumers perceived that the cashless payment is not secure as there is a high chance of
hacking and personal identity stolen. 44 percent costumers consider cost as major challenges
that keep them away from cashless payment. 11 percent consumers do not trust cashless
transaction. 10 percent people perceived that grievance body for settlement of cyber crime is
not available. 50 percent consumers do not aware about the concept of cashless economy,
especially from rural areas.
Conclusion and suggestion:
Based on the findings of the study, the paper concluded that in spite of the acceptability of the
policy there is need for more work to be done in the part of awareness to the rural dwellers.
1. The government of India should make available the necessary infrastructure like appropriate
internet connectivity in rural areas as well.
2. The government should make emphasis on reducing the cost of internet connectivity in
villages and cost of other necessary equipment.
3. The government of India should make concerted efforts to design an internet security
framework to check online fraud so that the public can be assured and protected against cyber
attack and fraud.
4. There should be adequate legislation on all aspects of the operations of the cashless system
so that both the operators of the system and the public can be adequately protected.
5. The government should design the program to motivate the shopkeepers of villages to accept
cashless payment of instead of cash.
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https://www.consumerfinance.gov
http://cashlessindia.gov.in
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