Digital payment drawback

Sep 5, 2023

It’s probably hard for most of us to switch from paper currency to digital at first. When we touched the currency and counted and gave, we felt more comfortable, but when everything became an illusion, our currency also became the same, we couldn’t see, touch, count, but it was there like imagination, there was no other way, so we accepted it.

Digital India is a boastful phrase. It is good so long as people get services through digital means, as a relief from the tormenting public experiences with government officials. Nine years have passed since we heard the slogan. Digital India has shined in a digital payment system, thanks to the proliferation of the Unified Payment Interface (UPI) payment system, which enables peer-to-peer transactions. National Payments Corporation of India (NPCI) rolled out the digital payment system in 2016. Instantly it became popular among youngsters in big towns. Gradually, it penetrated even in villages and low-income groups. Vegetable carts in villages, where there is still a mud road, carry QR codes for digital payment. People pay even Re 1 through UPI. In July 2023, this system recorded nearly 10 billion transactions for Rs 15.34 billion.

People find it very convenient. Even if there is no cash in hand, a QR code inspires people to buy tempting products. No problem, even if the bank account has a net balance of only Rs 100.

Once, Indians were the biggest household savers in the world. But we lost the distinction long ago. The gross savings rate consistently declined to 29 per cent in 2021 from 37 per cent in 2012. Last year, it fell to a 30-year low, thanks to the prodigality of Indians. Once digital facilities became available, people found nothing that forbade them to buy what they saw. Earlier, when people had nothing in their pockets they showed no desire to buy anything that fascinates them.

It is a natural tendency for people to keep some money in their accounts while withdrawing from the bank for their monthly expenses. With the UPI facility people find it easy to spend some more bit by bit, rarely worrying about small debits. High inflation also eats into their savings. With many small debits, the balance in the account touches the bottom. Banks have a good time with penal fees from account holders for not maintaining minimum balances. Savers have finally nothing in their account as surplus at the end of the month. People save nothing and pass the blame on inflation to hide the real reason for buying temptation, using digital currency to pay.

Every convenience comes at a cost. Some conveniences are disastrous. A capitalist economy over-depends on the blessings of whether it can deliver unpredictable results. Traditionally Indians are cautious about the future because of the transient weather pattern. That is the reason we have the high savings tendency inherent in us. I am afraid the UPI payment culture is altering the savings culture.