Biometrics to Fuel A More “Cashless Society” in India

India represents one of the largest market opportunities for payments, according to Bloomberg Technology. With a population of over 1.25 million eager to partake in rapidly evolving advancements in technology, India as well as “Brahat”, is poised to make the most of digital development transforming the payment space.

Digital Payment | Iris Biometric

In the past, India was known as a cash economy, in which Indian customers have largely preferred dealing in cash. But currently, it moves towards a cashless country. The contribution of cash for transaction has seen a declined at a rapid rate. In 2015, 78% of all customer payments were made in cash, down from 89% in 2010 and 92% in 2005 respectively. Moreover, from 2005 to 2010, the rate of decline in cash contribution was 0.8% whereas from 2010 – 2015, this same metric was 2.6%, indicating a rapid increase in adoption of non-cash instrument such as cards and digital payments (electronic/ ECH payments, mobile wallet etc.)

According to Boston Consulting Group, digitization of cash will accelerate over the next 5 years with non-cash transactions over taking cash by 2023. In details, the non-cash contribution for payment transactions is estimated to grow by 40% in 2020 and 59% in 2025, in which digital payments are expected to contribute to an extent of 26% by 2020 and 37% by 2025.

In terms of digital payment, alternative instruments will drive the growth in non-cash payments. In the year 2015 – 2016, around 747 million transactions occurred through mWallet and prepaid card combined, whereas only 390 million transactions happened through mobile banking. Based on this, BCG forecast that within 4 years span, PPI (mWallet and prepaid card) transactions have increased nearly double compare to mobile banking transaction. Some highlight mobile wallets in India are Paytm, MobiKwik, Freecharge…

To encourage more use of the platform for realizing a cashless society, the UIDAI has planned to increase biometric authentication capacity through Aadhaar from 10 crore to 40 a day. In details, Aadhaar Enabled Payment System (AEPS) allows users to make payments to merchants or shopkeepers without credit or debit cards using only their Aadhaar number and biometric authentication. In terms of government view, biometrics helps to deal with situations like recent demonization and curb black money menace while bringing in more financial transaction transparency.

Regards of banking, people can link their Aadhaar with their bank accounts and use AEPS for funds transfer, balance enquiry, cash deposits or withdrawals and inter-banking transactions. Currently, 118 public and private banks can use AEPS at present. NITI Aayog – CEO Amitabh Kant said: “We are asking mobile manufacturers to see if all mobiles made in India should be in-built with iris or thumb identification system to help Aadhaar-enabled transactions.”