 "ATM Kolkata")
A 60% jump in card usage across India following the demonetisation move by the government has put a strain on the backend payment systems network, forcing customers to put off purchases of goods.
Since the Narendra Modi government scrapped Rs 500 and Rs 1,000 notes last week, first-time usage of debit cards has shot up by 30% and there has been a 20% increase in activation of card machines that were dormant, according to digital payments processor Innoviti. The overall national growth in card usage was 60%, with majority skewed towards debit card usage.
Banks also saw a jump in debit card usage across India but one official, who confirmed the spike, could not immediately quantify it.
“There was heavy traffic in debit card transactions. A lot of people were using their cards for the first time, which further slowed down the system as many people could not recall passwords or follow instructions at automated teller machines (ATMs),” said Ravi Krishan Takkar, managing director (MD) and chief executive officer (CEO) of UCO Bank.
Since Saturday, retailers and shopkeepers across India saw transactions fail at point-of-sale machines, forcing many people to skip purchase of goods, as they also did not have adequate cash to buy them. In some of the retail outlets, customers had to wait for up to an hour to make payments. Adding to the woes of the customers, in some cases while debit-card transactions were shown as successful through alerts to buyers, but the merchants did not receive confirmation of those payments. In other cases, transactions did not even initiate.
“I waited for quite long for my payment to go through. Ultimately, I had to give up the purchase because I was not carrying enough cash,” said a customer at a retail hypermart.
Bengaluru-based Innoviti, backed by N R Narayana Murthy’s Catamaran Ventures, which processes about 20% of the country’s digital payments for businesses such as Reliance Retail and Titan, saw many customers transact less than Rs 500.
“The average increase across the country is about 60%. Average daily card (credit plus debit card) transactions are about Rs 1,400 crore. These have gone up to about Rs 2,000 crore per day currently,” said Rajeev Agrawal, CEO and MD of Innoviti Payment Solutions.
“The jump in transactions is driven disproportionately (200 per cent) by merchants in the lowest average ticket size band of Rs 1-500. This suggests that people had cards but were not using in this segment,” said Agrawal, adding: “The overall increase in transactions is more skewed towards debit card (75%), suggesting first-time card usage by hitherto inactive debit cardholders may be driving the transaction jump.”
With the note ban, the government is encouraging more people to use digital payments for their daily transactions, while discouraging use of cash for such transactions. The demonetisation plan has also inconvenienced millions of users across India, particularly poor people who were left with higher denomination notes and were unable to use those at counters to buy food or pay for local transport.
“Yesterday, there were reports of heavy traffic through card transactions, which had led to link failure for a few hours,” said an executive with a private-sector bank.
The jump in card transactions was higher against the national average of 65% increase in card usage. Majority of the spike in card payments has been in entertainment, restaurants and liquor, suggesting many consumers were not postponing spends but simply moving from cash to card in these categories.
Meanwhile, a large number of ATMs remained closed and banks struggled to configure them to dispense new currency notes.
At United Bank of India, close to 60 per cent of the ATMs could be configured, even as long queues were noticed outside the ones which were working.
“We are expecting that by the end of the day, all the ATMs will be configured,” said Pawan Kumar Bajaj, CEO and MD at United Bank of India.
