An interesting interview with Rajiv Kaul executive vice-chairman and CEO of CMS Info Systems, a cash management company , talks about the future of cash in India.
Some important snippets
“Consumers are less confident about when an ATM will work and dispense cash. So, people have started withdrawing more cash per ATM transaction (18-20% growth). It has also been observed that people are keeping more cash reserves at home for emergencies than they did before.”
“Japan has 18% cash to GDP compared to 12% in India. Germany has 75-80% retail cash transactions compared to 85-90% in India. The stock of currency grew in a developed economy like the US by 7% in the last five years (11-12% in India, pre-demonetisation). So, there is a need for cash as a preferred medium of transaction. Digital and cash will co-exist as they do everywhere in the world”
“Management of cash is still very inefficient and time-consuming. However, the cost of a cash transaction is the lowest, at about 0.25% versus the 1.5-2% credit cards charge. ”
Cash plays a critical role in enabling commerce and economic growth in India. Withdrawals through the ATM channel are up 22% from last year, at ₹2.65 trillion a month in April 2018. Consumers are withdrawing more money per transaction. Of the channels available for cash withdrawals—ATMs and bank branches—our analysis suggests that the cost of cash transaction at a branch can be as high as ₹40-45 per transaction versus ₹12-15 at ATMs.