In a world that is going digital, cash is still king - AGS India
                     Inaworldthatisgoingdigital,cashisstillking-
AGSIndia
Even though digital payments are on the rise, cash continues to hold its 
throne.Inaneconomylikeours,wearelikelytocontinuewitnessingthecoexistenceofboth
cash & digital payments. The Indian economy has been in a constant stateof 
evolution. From using precious metals, cowrie shells, and currency notes 
tonowintangiblepaymentmodessuchascards,BHIMUPI,QRcodes,andRFID
–
thepaymentlandscapeisevolvingatarapidpace.However,onemodethathasstoodthetest
oftimeiscash.
WhileIndiahaspredominantlybeenacash-intensiveeconomy,twoeventsmayhave 
challenged the status quo – Demonetisation & Covid-19. They broughtabout a change in people’s payment
habits. Before demonetisation, digitalpayments were very nascent in India. In 
just a matter of few years, digitalpayments have gained extraordinary growth, 
with the volume of transactionsincreasingataCAGRof36%.
Interestingly,cashincirculationisalsonowabout14.5%ofGDP.Accordingtothe data released 
by RBI, ahead of Diwali, the currency with public rose by Rs15,582crore.Onayear-on-
yearbasis,ithasincreasedbyRs2.21lakhcrore.
Thisisanindicatorthatdespitetherisingdemandfordigitaltransactions,cashhasstillseena
nupwardcurve.
 Let  us  look  at  various  reasons  for  this  increase:  
65.07%ofIndiansstillresideinruralareas
Indiaisacountrywithawidecustomerbasecomingfromurban,semi-
urban,andruralareas.Interestingly,theruralpopulationconstitutesover65%ofthe
total population of India. While the penetration of digital payments is deep 
inmetro cities and semi-urban areas, the rural counterparts continue to transact
incash;forwhichtheyrelyontraditionalchannelssuchasthebankbranchesandATMs. 
Newer services such as micro ATMs or Cash@PoS are playing 
animportantroleinmeetingruralIndia’scashneeds.
AsIndiaisanagrarianeconomy,itisobservedthatcashwithdrawalsincreaseduringthecrop
harvestseason,whichisusuallybetweenMarchandApril.
DirectBenefitTransfer(DBT)
The value of fund transfers by the means of Direct Benefit Transfer 
increasedfrom ₹619.4 billion during financial year 2016 to ₹5,525.2 billion 
duringfinancial year 2021. These schemes enable beneficiaries to receive 
benefitsdirectly into their accounts. This amount can only be withdrawn using 
AePS orATMs,therebyincreasingthemoneysupplyinthecountry.Moreover,thereare
43.90 crore beneficiaries of the PMJDY (Pradhan Mantri Jan Dhan 
Yojana).Theseinitiativeswillresultinincreasedcurrencywiththepublicasmorepeoplewil
lcomeunderthesegmentof‘bankedpopulation’.
 The  pandemicpush  
During the lockdown, many people withdrew large amount of cash as 
apreventivemeasureandtoavoidfrequentvisitstotheATMowingtorestrictionsduring 
nationwide lockdown. In fact, the average ticket size of withdrawals atany given time went up by almost 20 
per cent. While digital acceptance wasgaining momentum, there were many 
merchants who were not equipped to go‘digital’ completely. This could be 
because of factors like cost ofimplementation and lack of awareness among 
merchants – especially small shopowners & vendors. Hence, customers had continued to make payments in 
cashfortheirday-to-dayessentials.
Additionally,itwasobservedthatmanyretailersbeganofferingCash@PoSservicestocaterto
theincreasingcashneedsoftheircustomers.
 Unbanked  population  
There are about 15 crore Indians who still do not have a bank 
account.Moreover,manyIndiansaredailywageearners–
earningtheirlivelihoodbythemeansofcash.Alltheirday-to-
daytransactionstakeplacebythemeansofcash.
 Regulatory  policies  
Recently,theMinisterofStateforFinanceBhagwatKaradsaidthatoutofthe
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 
deployminimum1000ATMsayear.Suchamovewillcatertotheeverydaycashneedsofcit
izensandcashwillcontinuebeingaprimarymodefortransacting.
Growingcyber-securityconcerns
Whiledigitaltransactionshavebeensurging,manyIndiansarestillscepticalaboutmakingla
rgevaluetransactionsonline.Thisisduetotherising
cyber-attacksandfraudsthatdigitalpaymentmodesareexposedto.Asopposedto digital 
payments, cash-based transactions involve only the payer and thereceiver; hence, many customers feel it 
is safer to pay in cash. In a latest reportby globally a leading financial 
technology player, 71% respondents stated thatthey are concerned about scams 
and fraud owing to the shift to digital methodsof payments due to Covid-19. 
Additionally, digital payment frauds account 
forabouthalfofallbankfraudcasesinIndia.
Allthesefactorsestablishthateventhoughdigitalpaymentsareontherise,cashcontinuestohol
ditsthrone.Inaneconomylikeours,wearelikelytocontinue
witnessing the coexistence of both cash & digital payments. While 
theacceptanceofdigitalpaymentswillgrowatarapidpace,cashwillcontinuebeingthemos
tpreferredmodeformostIndiansinthenearfutureaswell.