Systemically Important Financial Market infrastructures (SIFMIs) & Retail Payments are 2 major components of cash-less transactions
The total volume of cash-less transactions in the year 2015-16 was Rs.1,723,425 Billion, ie, Rs.172.34 lakh crores! please note this number
Also note that 89.7% of the cash-less transactions happen under the head SIFMIs & Retail Payment is only 10.3% during the year 2015-16
SIFMIs include RTGS and Total Financial Market Clearing viz CBLO, Government Securities Clearing and Forex..yep..large token transactions
But our interest is not in this big ticket transactions, our interest is in the transactions in the retail payments..lets examine it detail
RBI divided retail payment into 3 major sub categories viz. paper clearing, retail electronic clearing & card payments
Paper clearing is not digital transactions though it is cash-less transactions. It includes CTS, MICR clearing & Non-MICR clearing
To get the right perspective, understand that during 2015-16, total paper clearing was 46% of total retail cash-less payments
As the digital payments takes centre stage, paper clearing component is getting reduced over the years..now see how it fare over years!
Look at this Graph, which will give a fair idea of how paper clearing is getting reduced over last 6 years and digital payments increases https://imgur.com/gallery/EsOE4
Reduction in paper clearing was 7% between 2011-12 to 2012-13, then next year it was 10% and for last 3 years it was 9% constant
So it is clear that there was no sea change in the paper clearing taking over by the digital transactions due to DeMon in last year
Now come back to the digital transactions in the retail payment sector, which is divided into retail electronic clearing and card payments
Retail Electronic Clearing is divided as ECS DR, ECS CR, NEFT, IMPS & NACH while Card Payments are divided Credit Cards, Debit Cards & PPIs
So the amount of transactions happening in each components should be compared with total transactions to understand the nuances
For example, the much flaunted and hyped UPI & BHIM are coming under the IMPS heading in the retail electronic clearing. so examine that
Please see this table which is giving the total retail electronic payment (retail electronic clearing + card payments) for the last 6 years https://imgur.com/gallery/rJDFJ
so there was no jump in the total retail electronic payments due to DeMon, in reality between 2011-12 and 2013-14, it shown more y-Y growth!
How much % is IMPS value in the total electronic payments? Rs. 4111 billion in Rs. 1,39,611 billion for 2016-17, ie, its just 2.94%!
Now pls understand that UPI is a portion of the IMPS & this BHIM is a component of UPI..so whatever increase in UPI is just a drop on ocean
To get the right perspective, please examine the component of UPI for the month of April 2017 in the total electronic retail clearing
Value of UPI for 4/17 is Rs. 22.41 billion while Total Retail Electronic Payments are Rs.14510.59 billion, ie, UPI volume is just 0.15%!!
Our Call Drop Minister can make any excited statements and show you sharp graphs that UPI & BHIM is shooting up..but its just drops in ocean
Look at another perspective. As per latest NPCI data, there are 1.454 crores download of BHIM & 0.3976 crores transactions happened in "May17*
ie, Daily 1.2825 lakh transactions are done using BHIM. ie, Out of 1.454 crores downloads, only 0.9% people use it for daily transactions!
When you compare this 1.2825 lakh daily transactions with the population of 125 crores, you can see that daily BHIM is just used by 0.01%!
Of course, BHIM with a transaction volume of 42716 & amount of Rs. 0.02 bn in Dec16 is shot up to 3975750 trans & Rs. 13.07 bn in May17
But when considering the total retail transactions, this is a tiny drop..It is just a wild dream that these are replacing the CASH!
To understand this, please look at the withdrawal of cash using Debit/ATM cards for the last 6 years https://imgur.com/gallery/p2WOs
What is this graph indicates..see the blue line, the number of transactions increased though there was cash crunch due to DeMon in last yr
Now look at POS transactions under credit cards for last 6 years..understand that this is also just 2.4% of retail electronics transactionshttps://imgur.com/gallery/2DFOi
IMPS transactions during the last year witnessed a sharp increase...please see this graph. But can it seen in isolation or its readjustment? https://imgur.com/gallery/HoCdp
Compare the ECS Dr & ECS Cr between 2015-16 & 2016-17. it was Rs. 2711 billion in 2015-16 which fall to Rs. 183.22 billion in 2016-17
It can be very well assumed that zero transaction fee of UPI tempted many people to discard ECS and embrace UPI/IMPS for payments
ECS Dr is used to collect utility payments, EMIs etc. Naturally people leave ECS & embrace UPI to avoid little transaction fees there
Look at NEFT transactions which is almost 50% of the total retail electronic transactions for last 6yrs. Nothing dramatic due to DeMon here! https://imgur.com/gallery/YhNX9
Look at the total business volume of mobile wallets, Rs.532 billion in 2016-17 from 206 billion in 2015-16, but this too 0.4% of Retail!
So there are re-adjustments in various components in the retail electronic payments & some substantial increase in insignificant components
But if you look at the larger picture of retail electronic transactions, you can see that there is nothing dramatic happened due to DeMon
A study by Boston Consulting Group & Google titled Digital Payments 2020 reveals that 78% retail transactions are done with cash in India
so whatever, we are discussed here as total retail electronic transactions are just 22-25% of the total retail transactions happening here
Can you flaunt increase of even 200% of insignificant components like UPI and BHIM & say that we are leapfrog to DIGITAL UTOPIA? Ponder
Government is still in a Fools paradise and throttle the cash flow which is very much needed for the rural and retail economy of country
See all graphs shared by me here for doing an independent assessment to see that digital is happening for last couple of years as a CHOICE
Force feeding or Emperor's whimsical DeMon or the lucky dips didn't result in a huge behavioural change in Indians to embrace DIGITAL
Rather than driven by petty and cheap ego, hope that the Government will shed them and wake up to ensure enough cash needed for economy
If Government still holding on to their petty ego and discarding the pressing needs of economy, the nation will pay a heavy price!
I have his approval to mirror his Twitter threads on Reddit.
James has retweeted a link to this post.
Links to reddit posts are easier to share when compared to twitter threads.
I'd quoted a specific tweet of his - to give him credit. It was taken down by mods stating that his Twitter account was unverified and I needed to remove the link to his tweet. Anyway, the intent was to share the fact-based rebuttal to the govt narrative.
If you have any queries related to this post, please address them directly to James Wilson on twitter.
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