BACKGROUND OF THE TOPIC
Adoption of cashless transactions been significantly pushed by Prime Minister Mr. Narender
Modi as part of government reforms after demonetization of high value currency of Rs.500 and
Rs.1000. The demonetization resulted in unprecedented growth in digital payment. The digital
wallet companies had shown the growth, Indian government and private sector companies such
as paytm, free-charge and mobikwik had been aggressively pushing several digital payment
applications. Digital transfers by using apps has brought behavioral change and helped in the
adoption of digital payment. This has resulted in ease of transfer of money in rural areas which
was not touched earlier by the digital payment method. Now many foreign investors wants to
invest in digital payment industry which is new attractive destinations because of the scope of
tremendous expansion n in India. There are number of facilitators which are leading to the
growth of digital payment and transition from cash economy to less cash economy. These
facilitators include penetration of internet connectivity on smartphones, non-banking financial
institution facilitating digital payment, one touch payment, rise of financial technology sector
and push by government either by giving incentives or tax breaks. These all factors are creating
positive atmosphere for growth of digital payment in India.
The cashless economy is a situation in which the flow of cash within an economy is non-existent
and all transactions are done through media channels such as direct debit, credit and debit cards,
electronic clearing and payment systems such as Immediate Payment Service (IMPS), National
Electronic Funds Transfer(NEFT) and Real Time Gross Settlement(RTGS). Today credit card
and online payment services are becoming increasingly popular in urban India, paper currency
notes are still an essential part of daily life. One saying is revenue is vanity, cash flow is sanity
but cash is king. Cash may be defined as any legal medium of exchange that is immediately
negotiable and free of restrictions.
IMPORTANCE OF THE STUDY
The E wallets like Pay tm and Google Pay are offering their digital wallet apps from past few
years, and they were encouraging all to the way to the cashless economy for a long time. But
with the present scenario where people are facing some massive shortage of cash in current times
has become difficult for them to make offline payments or direct cash payments. E wallets were
the best platform to settle all the cashless transactions, and it can help to send and receive money
across India. So, using E wallets is better, to improve the present money shortage situation you
can only use E wallet money in various fields like shopping, travel booking, taxi booking, and
even it was acceptable for few other sites which offer food and other services. Therefore the
study that focuses on the factors that affecting the effectiveness of e wallet transactions and its
awareness among youth.
OBJECTIVES OF THE STUDY
1. To know the effectiveness of e wallet transactions.
2. To assess the awareness of e wallet transactions among youth.
3. To study the impact of e wallet transactions.
4. To evaluate the different factors attracted in e wallet system
SCOPE OF THE STUDY
The scope of the study mainly concentrated on the area of Kasaragod district where different
sectors of people are living and consist every sectors of the economy, So the study on e - wallet
transactions among youth is an attempt to recognize the impact of demonetization and their
transformation into online and e wallet operations.
NEED OF THE STUDY
As M-wallet is surging on an account of growing online payment transactions in India. This
study under takes to give an insight about E-wallets payment gateway services. The study helps
in understandings the preference of of the consumers with regard to [Link] helps to know
the kind of services used by the consumers which are provided by the E-wallets. The study also
aims to find factors influencing the perceptions of consumers towards e-wallets.
STATEMENT OF THE PROBLEM
The demonetization and its effect lead the resurrection of e wallets in India. There is a steady rise
in the use of e wallet transactions after demonetization process, even in rural areas e wallets are
accepted and practices, E transactions and e wallet operations made things comparatively easier
than regular market operations, In the modern era online transactions and payments have a
significant role, and people are very familiar with the operations of mobile and online
transactions. But at the same time lots of people who have still not very much knowledge about
these types of transactions, So this is the attempt to know the awareness and effectiveness of e
wallet transactions among the youth with special reference to Kasaragod district.
CURRENT SCENARIO
The E- wallet is the engine of mobile commerce. Without a E-wallet, consumers need not to
enter a wealth of information into a form constrained by the smartphone’s screen size. While the
mobile wallet space for in-store payments has only emerged with the launch of Apple Pay in the
autumn of 2014(soon followed by Google’s Android Pay and Samsung Pay), the concept of a
digital wallet has been in-market since the early days of online commerce.
PayPal created a E- wallet to support the first major online market place, eBay. While PayPal
attempted to broaden the offering’s appeal outside of eBay for several years, the concept of
storing payment information with an online provider to enable purchases outside of eBay
initially didn’t catch on. Amazon 1-click emerged in 2006, raising the bar in terms of user
experience (UX) and expanding merchant and customer vision of the digital wallet’s capabilities.
Since then, other digital and mobile wallets have emerged, and there is now a variety of different
approaches t online and mobile proximity payments, all falling under the general description of
“E- wallet”.
An E- wallet is a software application with the following base functionality:
It offers secure enrollment of the user (application download, identity check) and secure
provisioning of credentials (e.g., user ID and password for wallet access).
It offers the ability for the user to securely provision and store customer identity
information (e.g., email address), payment information (e.g., credit card data), and
shipping address details. The user can preselect a payment method within the wallet
application to execute commerce transactions (i.e., pay merchants online, in-app, or in-
store).
The funding of the wallet payment may come from a debit or credit card, prepaid card,
bank account, e-money account, virtual currency, or any other store of value.
E- wallets often have many more functions, including person-to-person (P2P) payments and
other payment methods, balance-inquiry and reporting functions, support of loyalty programs
(rewards, coupons), and other functions .
The terms “mobile wallet” and “e-wallet” are specific implementations of the digital wallet for
the mobile device and for the desktop/browser environment, respectively.
ECONOMICS AND GROWTH POTENTIAL
In terms of economics, mobile wallets tend to be an enabler of commerce rather than a
standalone revenue generator for organizations that offer them. For retail financial institutions,
the value rests with the potential to increase transaction volume for their payment cards by
ensuring that the financial institution’s card is top of wallet within the mobile offering. An
additional benefit is the potential to increase customer retention by increasing the connection
between the customer and his or her financial institution. Depending upon the ecosystem, wallet
providers can generate revenue by taking a commission on sales made through the wallet. For
instance, in the United States, Apple Pay charges 0.15% of the payment value to issuers for
transactions handled through the wallet. Marketplace wallet providers, such as Alipay, charge
merchants an upfront fee to participate in the marketplace, along with a commission on each
sale. Others, such as Baidu Wallet, make their money through search and display advertising on
their platform. With the growth rate of mobile and online commerce, the plethora of
smartphones, and the variety of approaches being taken to deliver a digital wallet, it’s clear that
the space is going to grow rapidly in virtually every corner of the globe.
THE EVOLUTION OF E- WALLETS
The combination of widespread internet access, increased bandwidth, and devices that can
capitalize on that bandwidth to deliver a new customer experience is driving the explosion in
wallet development and customer usage. And while physical-world mobile wallets and online E-
wallets are currently on separate but parallel development paths, it is inevitable that the lines
between the two will blur and hybrid payment tools using online and mobile will emerge. It’s
impossible to predict the path of development with certainty, but there are a few signposts and
landmarks that can guide the vision. The following is a discussion of the possible evolutionary
paths for different types of digital wallets.
The demonetization resulted in tremendous growth in digital payments. With the government
initiative such as Digital India and increased use of mobile and internet are means to exponential
growth in use of digital payment. This transformation towards digital payments benefits in more
transparency in transactions which empowers the country’s economy . In recent days many
changes took place in the payment system like digital wallets, UPI and BHIM apps for smooth
shift to digital payments. The objective of this research paper is to study the positive impact that
Digitization of payment system. The present paper focuses on the analysis of the adoption level
of these digital payment systems by customers. Primary data was collected from 183 respondents
in Hyderabad. The collected data through the questionnaire were analyzed statistically by using
chi-square technique. The Digital India is the Indian Governments flagship program with a
vision to convert India into a digitally empowered country. Faceless, Paperless, Cashless is one
of supposed function of Digital India. as part of government reforms Prime Minister Mr.
Narender Modi demonetized the high value currency of Rs.500 and 1000 in November 2016 and
also launched the digital India initiative in [Link] initiatives have provided extensive boost
up to the digital payment system in the country. Governments other initiatives like BHIM and
UPI are supporting in transition and faster adoption of digital payments. Electronics Consumer
transaction made at point of sale (POS) for services and products either through internet banking
or mobile banking using smart phone or card payment are called as digital payment. The digital
payment system has the following phases, [Link] 2. Invoicing [Link] selection
[Link] confirmation. This payment system generally includes 3 electronic payment
instruments namely, cash, cheque and card. Post demonetization is effecting the e-commerce
sector that Cash on Delivery is gradually getting stopped and other modes of payment is replace
like Card on Delivery, Net Banking, Debit Card, Credit Card etc. .Demonetization will positively
help out e- commerce industry in India enhances the chance for people to go cashless. As part of
encouraging cashless transactions and transforming India into less-cash society, various modes
of digital payments are available.
DEMONETIZATION
Demonetization is the act of stripping a currency unit of its status as legal tender. It occurs
whenever there is a change of national currency: The current form or forms of money is pulled
from circulation and retired, often to be replaced with new notes or coins. Sometimes, a country
completely replaces the old currency with new currency. The opposite of demonetization is, in
which a form of payment is restored as legal tender.
BREAKING DOWN 'DEMONETIZATION'
There are multiple reasons why nations demonetize their local units of currency:
To combat inflation
To combat corruption and crime (counterfeiting, tax evasion)
To discourage a cash-dependent economy
To facilitate trade
DEMONETIZATION AND ITS IMPACT ON INDIAN ECONOMY
On November 8, Indian Prime Minister Narendra Modi took a historic decision by announcing
that the high-denomination notes (Rs 500 and Rs 1,000) then in circulation would cease to be
legal tender. With demonetization effort 86% of India’s currency was nullified that aimed to
wash the stock of ‘black market's cash supply’ and counterfeit notes out of the economy and
convert it into the licit, banked and taxable, part of the economy. To reduce the impact of sudden
commercial collapse, a 50 day period ensued where the population could (ideally) exchange their
canceled cash for newly designed 500 and 2,000 rupee notes or deposit them into bank accounts.
Irrespective of the widespread anguish and household disturbances, an optimistic sentiment
shown in favour of the decision. Cash is the preferred mode of transaction in India and only less
than half the population uses banking system for monetary transactions. An immediate public
anger appeared against the mismanaged and unprepared banking system. The banks didn’t have
enough of the newly designed banknotes (Rs 500 and Rs 2000) to distribute in exchange for the
canceled notes. The move has also led to a shortage of lower denomination notes such as Rs 100
and Rs 50 that are still legal tender, as people have taken to conserving whatever cash they have
in hand. The demonization initiative has caused a sudden breakdown in India’s commerce and
the unbanked and informal economy is hard hit. Trade across all aspects of the economy has
interrupted, and sectors like agriculture, fishing, and the huge informal market were almost shut
down during the initial days of announcement. The informal sector in India employs more than a
majority of the workers and most transactions are in cash. Disruption to this system could
endanger the employment and livelihood of weaker sections of society. The change disturbed the
lives of ordinary people, led to widespread need and major job losses for the poor.
Nevertheless, although India’s demonetization move was apparently mismanaged in the
beginning, the effects at micro level look advantageous. For instance, all sorts of illegal
activities, like terrorist financing, etc. have been completely hit after the announcement. The
demonetization process has also repaired India's counterfeiting problem for the near to mid-term.
The cash centric black market for the most part ceased to function with the nullification of the
bulk of its currency. It has also been reported that the new 500 and 2,000 rupee notes are less
vulnerable to counterfeiting, having advanced security features. It is also thought that the drive
will wipe out a measure of corruption and tax evasion in India’s real estate market. Growth in
cash-intensive sectors such as real estate, construction and FMCG is likely to take a hit in the
short term as consumers are deferring purchases. The real-estate market is likely to come to a
standstill with property prices likely to fall and the possible tax inquiries following
demonetization will affect both consumption and investment in the formal and informal sectors.
However, there is a positive side to the story, over the medium term, there would be benefits
through higher government spending and greater financial inclusion. Also, the movement of
household savings from physical to financial will help boost growth, according to Yes Bank BSE
0.90 % report. With exchange of the old currency notes coming to an end, many people are
forced to open accounts to save their money. It is estimated that banks have opened about 30
lakh (and still counting) new accounts since the demonetization drive began on November 8.
India's largest bank, State Bank of India (SBI), with its 17,097 branches – half of which are in
the rural and semi-urban areas – is opening 50,000 accounts a day. The leading consumer
internet companies in India (Flipkart, Snapdeal, Shopclues, CC Avenues, Ola and Oyo Rooms)
have applauded the move, saying it will pave the way for digital payments, aid the process of
financial inclusion and the overall transformation in the economy will translate into long-term
benefits for the industry. Payments companies Paytm and Freecharge saw a surge in adoption of
their digital wallets. According to market experts, the growth of digital payments and wallets is
the first phase of the impact and will give big boost to lending and credit as the digital records of
merchants will expand and create more demand in the second phase. Even though
demonetization move created adverse short-term policy impact the real impact of must be
assessed in the medium/long term. The reduction in overall investments, both in the formal and
informal sectors, would certainly reduce economic growth potential. However, the move needs
to be followed up with ensuing actions to remain effective. These actions relate primarily to
structural changes to make the system more lawful, reducing too much bureaucracy, make the
tax system simple and transparent. In addition, a greater effort is required to include the informal
sector and ensure effectiveness and the illegal activities such as generation of black money and
corruption should not be channeled back into the economy.
IMPACT OF DEMONETIZATION ON BANKING
The biggest beneficiary from Demonetization will be the Banking Sector the government’s
decision on November 8 to immediately demonetize the Rs.500 and Rs.1,000 notes in
circulation, which account for 86% of all currency in circulation, has impacted a raft of sectors.
Consumers have turned frugal, causing a sharp drop in demand for goods and services. While
farmers and small industries will bear the brunt and sectors like transport and real estate will
visibly be in pain, several other industrial sectors will have to scale back services or production.
POSITIVE IMPACT:
The biggest beneficiary from this policy will be the banking sector. This is mainly due to the
queues of people depositing cash in the banks – which will result in substantial liquidity with the
banks. As the deposits with the banks will increase so will increase the CASA, which will
increase the Net Interest Income and the Net earnings of the banks. However, this will not be
abnormally high since the RBI has increased the CRR in the short term to mop up some of this
liquidity. As stated above higher CASA means large amount of deposits are in current and
savings account. This way the banks get funds at no or very low cost (interest). Banks do not pay
interest on the current account deposits and pays a very low % of interest on savings account
deposits. Hence, it is a good measure to get deposits at no or very low cost. As the banks get a lot
of liquidity in their hands, they are
Expected to enhance the borrowing cycle by lending the money at a lower rate of interest. Hence,
the interest rate on borrowing will lower down.
NEGATIVE IMPACT:
NBFCs and microfinance institutions (MFIs) are under severe stress as their collection cycles
(mostly in cash) have gone awry post November 8. Most NBFCs and MFIs have announced
‘collection holidays’ till such time there’s sufficient money in the system. The government’s
demonetization drive may puncture the earnings of most banks this quarter. With most staffers
handling the Rs.500 and Rs.1000 note deposits, exchange and withdrawals, “revenue yielding”
operations such as vending loans and cross-selling investment products have taken a backseat in
most banks. The earnings of banks may take a hit in the third and fourth quarter. We may not see
loan book growth as most banks are busy facilitating the demonetization process. They’re not
aggressively selling a lot of credit products now. That apart, the SME and real estate sectors, to
which most banks lend a significant part of their book – are in a state of major flux.
Temporary measures to mop up liquidity:
The Reserve Bank of India or RBI has announced incremental CRR (cash reserve ratio) of 100%
on the growth in bank deposits between 16 September 2016 and 11 November 2016. The entire
incremental deposits (~Rs3.2 Tn) in the prescribed period have to be parked with the RBI as
CRR. No interest will be paid on CRR, while banks will have to shell out ~4% interest on the
funds received in savings deposits. Not only the expected positive carry on incremental deposits
has been wiped out, but there will also be a negative carry on such deposits. The higher CRR is a
temporary measure to drain liquidity in the banking system and will be reviewed in the fortnight
ending 9 December 2016 or even earlier.
This is a temporary measure to suck out excess liquidity in the banking system after the
announcement of demonetization by the government as banks were parking bulk of the receipts
through reverse repo window. Given the RBI’s limited capacity to accept funds under reverse
repo and related interest outflow on the same, the central bank announced parking of incremental
deposits under CRR which entails no interest outflow.