Cash vs digital transactions: the reality

Shopkeeper to a customer who has purchased some items from his shop: That will be `200 Sir!
Customer: I have a digital payment app on my phone and I see that you are accepting all digital payments. Can you help me with the QR card here and I shall scan and pay for the same?
Shopkeeper: Oh, QR code payment? It is not working well. Transactions are not going through properly. I have not got the money for some of my past transactions. Can you pay cash?
Customer: I don’t have enough cash. Can I pay using my debit card?
Shopkeeper: My card machine was not working in the morning. Let me try again.
The shopkeeper takes out the machine, hidden below a yellow cloth, swipes customer’s card on the machine. The machine does not connect. Tries again. The connectivity drops again.
Shopkeeper (sheepishly): Sir, there are ATMs just around the corner. Can you please withdraw some cash and pay me?
The customer goes to the nearest ATM. Actually, there are three ATMs of different banks in shops next to each other. The first ATM is out of cash. The other ATM, which is the customer’s bank’s ATM, is shut down and the site is being dismantled. There is a notice stuck on the door requesting customers to go to the next nearest ATM of the bank, which is more than 2 kms away. The third ATM is in fact a recycler, a cash deposit cum withdrawal machine, and has a queue of around 10 -12 people, most of them waiting to deposit cash.
The customer thinks: Should I wait in the queue, take the cash and buy the item I want or should I just forget it and order online? No, my daughter wants the item today. Let me stand in the queue and withdraw some cash to pay the shopkeeper.
Customer grumbles: What use are all these digital payment tools when they don’t help me when I need them the most? Why aren’t there enough ATMs with cash in them? Why has my Bank shut down its ATM? It has shut down ATMs in other places too. Perhaps I should switch my bank account to the bank which has ATMs everywhere? Why are banks clubbing ATM withdrawals and deposits in one machine? Look at the queuing it has created! Who will wait so long, just to withdraw a few notes! Let me withdraw more cash at one go and keep it with me so that I don’t have to keep standing in queues like this! With so many options, its getting more complicated every day.
This reflects the reality of the society that we face today and such thoughts occur to us as well!
So, where is all this leading to? Customers are back to relying on cash and withdrawing more cash in one transaction from the ATM. Precisely the situation which the government, the regulator and the banks want to avoid!
What has gone wrong here? The intentions are right, but the execution is not. Digital transactions are discouraged at the point of sale, even though incentives are being provided to the retailer for accepting digital transactions. However, the implementation is inconsistent, and retailers prefer the feel of money in their tills than otherwise. ATMs have been regularly facing the shortage of cash supply and consequently doing lower transactions. Banks are rationalizing by shutting down low transacting ATMs to save costs. The installation of cash recycling machines, takes care of cash availability and processing costs of the bank to a large extent, but what about the poor customer who has to wait in the long queue, just to withdraw a small amount? Is ‘Cash N Dash’ no longer a reality?
The ‘digital disruption’ leading to the phenomenal growth in P2P and P2C transactions, is indeed a welcome sign for the health of the overall payment economy in the country. But the ticket sizes of the transactions are too low to make any real impact. Real success will come when digital rules the roost in medium and large value transactions of every kind, with cash being used for day to day, small ticket transactions. Cash will indeed need to become the grease to move the gears of digital transactions in the economy. When one carries cash, there is not an iota of doubt about its acceptability. With digital transactions, there is always a level of uncertainty about acceptability, networks, payment schemes etc
Having a healthy number of ATMs in the country on par with international levels will ensure that ATMs play their part in nation building and provides a viable environment in the improvement of the economy and people’s well-being.
Magazine: Banking Frontiers
Dated: 25 Feb 2018
Author: Radha Rama Dorai, MD-ATM and Allied  Services, FIS