Mobile Payments in India Find Unexpected Stumbling Block

December 23, 2016         By: Steven Anderson

The ongoing cash ban in India, which rendered both 500 and 1,000 rupee notes unusable, has meant a lot of hardship and plain old disaster in some sectors. It’s even done a number on some manufacturing markets and small businesses are reporting catastrophic losses and potential closures.

While some have turned to mobile payment systems as a means to not lose all that value—and the government has to a certain extent encouraged such a move—shopkeepers are less than enthused about this.

That’s actually a reversal from what was seen previously, as several shopkeepers had been seen turning to mobile wallet systems. However, that move was backtracked a bit as reports note that the limits on fund transfers from wallet to bank are proving sticky for businesses to handle.

What’s more, the accompanying withdrawal limits at the banks are proving another bottleneck that isn’t adding up to good news for businesses.

A kirana shop owner near Pedawaltair, Bucchi Ramana, explained “Initially due to the cash crunch, we started accepting payments through mobile wallet. The number of people paying through mobile wallet instead of cash also steadily increased. But, the problem is that none of the distributors are accepting payment through mobile wallets. They are insisting on cash, so we have to go to the bank and withdraw the money.”

Basically, the problem is a bottleneck between suppliers and retail outlets. Much of the problem would be addressed if everyone accepted mobile payments evenly, but since not everyone does, there’s a clear problem of supply of cash.

The retailers have cash, just not in a form the suppliers will take. The form the suppliers will take isn’t always available when the retailers need it and not in the amounts needed. Bank officials noted that updating certain details would improve the transfer rates, but it doesn’t seem this is always known about or executed, another potential problem needing addressed.

It comes down to the same point that it’s always come down to. Large-scale bans of cash are not a good idea unless there’s something immediately ready, preferably already in use, to supplant cash. Mobile payments can be a fine alternative, but need to be universally accepted first…just like cash.