Review of report: Cashless Payment System in India

This post reviews Cashless Payment System in India - A roadmap authored by Prof Ashish Das, IIT Mumbai and Ms Rakhi Agarwal.  This report is a well researched and comprehensive report which is a must read for payments professionals, those who focus on India and others as well.  The report is unbiased and credible as the authors objective has been to identify factors to deliver an effective and efficient retail payment tender for India.  As a professional addressing opportunities in India, I have been waiting for this report for a while now.  The 104-page report did not disappoint.  While I normally do not have much patience (or attention span) for long documents, this report was an easy and quick read.  I encourage you all to read this report.

The summary of the findings are:

• Encourage the usage of no-frill debit cards and devise ways to bring in awareness on debit card usage among merchants and cardholders through focused financial education campaigns.
• The MDR on all no-frill debit cards be fixed at 0.2% per transaction with a cap at Rs 20.
• The no-surcharge rule to be applied strictly to no-frill debit cards
• Make all debit card transactions at POS PIN-based.
• Cash withdrawal at POS should be clubbed along with purchase.
• Merchants to be given freedom to surcharge on credit cards.

The report also recommends:

•  Change the distribution of MDR from 75%:20%:5% to 25%:50%:25% (Issuer: Acquirer:Network)
• Tax benefits to merchants for accepting electronic payments
• Tax benefits (and elimination of duties) for EDC terminal manufacturers
• RBI could consider subsidizing all switch charges so as to reduce costs and make card usage more attractive.

You can find some of the press coverage of the report below (this list is being updated to reflect recent articles):

• Economic Times
• Economic Times: Use of credit cards goes down
• Business Today 
• India Today
• Hindu Business Line
• Times of India
• Rupee Times
• PIN Debit Blog
• [Mobile] Commerce Insights: Interview with Prof Das  
• Business Standard
• Economic Times: Debit card use can be popularised with cutting MDR
• IBN Live

Note: IIT Mumbai faculty page is the source of the picture of Prof Das