Enhanced Security Is the Way Forward To Adopting a Cashless Economy in India

The Indian economy is still undermining the vast potential of streamlining the supply chain and improving efficiency by digitising payments. And this fundamental challenge is already evident! One of them is reliable connectivity in rural regions. So, what are the Strengths, Weaknesses, Opportunities, and Threats a cashless economy faces?

Strengths: The convenience of making transactions – securely, accurately down to a single penny, and even remotely is something that a stack of notes cannot fulfil. Similarly, transparency is yet another strength that makes cashless payment viable since every transaction ever made is recorded on a ledger and can be easily tracked down.

Weaknesses: With a Cash to GDP ratio of 12%, the currency circulation in India is higher than in most nations. This, as well as a lack of financial literacy and infrastructure, poses a significant problem against facilitating the Indian economy with dominance in cashless payment. Once these are ironed out, data connectivity will become another issue.

Opportunities: Tax collection, by far, has been the frontrunner opportunity with a cashless payment ecosystem. In India, curbing black money is a significant challenge for the government. Since cash trails are impossible to track, India needs to emphasise ending this parallel economy, a glimpse of which we have already got from demonetisation.

Threats: Most customers – even those with the resources for cashless transactions – perceive cash as the fastest and most convenient mode of payment. Along with compliance challenges such as security, refunds, and encryption, earning customers' trust is vital to adopt a cashless economy in India.

The nation’s infrastructure to pave the way for an entirely cashless economy has already been established, thanks to significant payment ecosystems and FinTech start-ups. Especially in the past five years, payment ecosystems like PayTM and PhonePe have been rewarding customers with cashback offers, discounts, and early bidding to promote a cashless economy. However, a significant challenge when it comes to digital payments is security. Let’s now look at how and why securing the cashless payment ecosystems is the next step towards bringing a wider adoption by customers:

Prevention of Fraud: Digital payment ecosystems in India have been experiencing rapid growth; so are fraudulent activities and money laundering. Therefore, addressing security and compliance risks would allow even marginalised communities to become financially independent, encouraging the convenience of a cashless economy.

Hassle-Free Payments with Reduced Technical Failures:28 billion! This number indicates India’s ability to securely execute over a billion digital payments monthly. This has been made possible mainly by bolstering cybersecurity to minimise technical failures, maintenance, and manpower, thus, reducing transactional costs.

As cashless payment solutions continue to evolve and gain adoption in remote regions, Mastercard – one of India’s leading credit card and payment ecosystems – is advancing the economy with agile security solutions, ensuring both customers' and merchants' trust. From making safer transactions with their EMV Chip to verifying payments with Secure Code, Mastercard is bringing programs to enable shoppers to experience reliable payment environments.

Sandeep Malhotra, Executive Vice President of Products & Innovation, Asia Pacific for Mastercard adds, “As Mastercard enables various card-based solutions, it is crucial to enhance safety and security in account-based payments which form the majority of digital transactions in India. Mastercard’s suite of solutions allow real-time clearing and settlement infrastructures and applications supporting multiple use cases like Mobile tap and pay, e-commerce checkout and QR Scan and Pay. Together, they form the bedrock of a secure ecosystem of digital payments cutting across both card-based and account-based payments.”

The gradual shift from cash to digital has a proven positive impact on the Indian economy. What's still in a debate is whether traditional financial institutions are fully prepared to keep up with technological advancements, security compliances, and most importantly, customer needs. Which new payment ecosystems will emerge? And what are the demands of customers and merchants? Each of these questions will be answered differently by every service provider. As more consumers embrace a cashless economy, addressing technological gaps will still be the first and primary task.