In a world that is going digital, cash is still king - AGS India
                     In a world that is going digital, cash is still  
king - AGS India
Even though digital payments are on the rise, cash continues to hold its throne.  
In an economy like ours, we are likely to continue witnessing the coexistence of 
 both cash & digital payments. The Indian economy has been in a constant state  
of evolution. From using precious metals, cowrie shells, and currency notes to  
now intangible payment modes such as cards, BHIM UPI, QR codes, and RFID
– the payment landscape is evolving at a rapid pace. However, one mode that 
 has stood the test of time is cash.
While India has predominantly been a cash-intensive economy, two events may 
 have challenged the status quo – Demonetisation & Covid-19. They brought  
about a change in people’s payment habits. Before demonetisation, digital  
payments were very nascent in India. In just a matter of few years, digital  
payments have gained extraordinary growth, with the volume of transactions  
increasing at a CAGR of 36%.
Interestingly, cash in circulation is also now about 14.5% of GDP. According to 
 the data released by RBI, ahead of Diwali, the currency with public rose by Rs  
15,582 crore. On a year-on-year basis, it has increased by Rs 2.21 lakh crore.
This is an indicator that despite the rising demand for digital transactions, cash 
 has still seen an upward curve.
Let us look at various reasons for this increase:
65.07% of Indians still reside in rural areas
India is a country with a wide customer base coming from urban, semi-urban, 
 and rural areas. Interestingly, the rural population constitutes over 65% of the
total population of India. While the penetration of digital payments is deep in  
metro cities and semi-urban areas, the rural counterparts continue to transact in 
 cash; for which they rely on traditional channels such as the bank branches 
and  ATMs. Newer services such as micro ATMs or Cash@PoS are playing an  
important role in meeting rural India’s cash needs.
As India is an agrarian economy, it is observed that cash withdrawals increase 
 during the crop harvest season, which is usually between March and April.
Direct Benefit Transfer (DBT)
The value of fund transfers by the means of Direct Benefit Transfer increased  
from ₹619.4 billion during financial year 2016 to ₹5,525.2 billion during  
financial year 2021. These schemes enable beneficiaries to receive benefits  
directly into their accounts. This amount can only be withdrawn using AePS or  
ATMs, thereby increasing the money supply in the country. Moreover, there are
43.90 crore beneficiaries of the PMJDY (Pradhan Mantri Jan Dhan Yojana).  
These initiatives will result in increased currency with the public as more people 
 will come under the segment of ‘banked population’.
The pandemic push
During the lockdown, many people withdrew large amount of cash as a  
preventive measure and to avoid frequent visits to the ATM owing to restrictions 
 during nationwide lockdown. In fact, the average ticket size of withdrawals at  
any given time went up by almost 20 per cent. While digital acceptance was  
gaining momentum, there were many merchants who were not equipped to go  
‘digital’ completely. This could be because of factors like cost of  
implementation and lack of awareness among merchants – especially small shop 
 owners & vendors. Hence, customers had continued to make payments in cash  
for their day-to-day essentials.
Additionally, it was observed that many retailers began offering Cash@PoS 
 services to cater to the increasing cash needs of their customers.
Unbanked population
There are about 15 crore Indians who still do not have a bank account.  
Moreover, many Indians are daily wage earners – earning their livelihood by the 
 means of cash. All their day-to-day transactions take place by the means of  
cash.
Regulatory policies
Recently, the Minister of State for Finance Bhagwat Karad said that out of the
2.13 lakh ATMs in the country, 47% are in rural and semi-urban areas.  
Moreover, the RBI has apprised all White Label ATM operators to deploy  
minimum 1000 ATMs a year. Such a move will cater to the everyday cash needs 
 of citizens and cash will continue being a primary mode for transacting.
Growing cyber-security concerns
While digital transactions have been surging, many Indians are still sceptical 
 about making large value transactions online. This is due to the rising
cyber-attacks and frauds that digital payment modes are exposed to. As opposed 
 to digital payments, cash-based transactions involve only the payer and the  
receiver; hence, many customers feel it is safer to pay in cash. In a latest report  
by globally a leading financial technology player, 71% respondents stated that  
they are concerned about scams and fraud owing to the shift to digital methods  
of payments due to Covid-19. Additionally, digital payment frauds account for  
about half of all bank fraud cases in India.
All these factors establish that even though digital payments are on the rise, cash 
 continues to hold its throne. In an economy like ours, we are likely to continue
witnessing the coexistence of both cash & digital payments. While the  
acceptance of digital payments will grow at a rapid pace, cash will continue 
 being the most preferred mode for most Indians in the near future as well.