The use of cash has bounced back to pre-lockdown levels, led by e-commerce transactions and cash withdrawals through the Aadhaar-enabled Payments System (AePS) channel.
Footfalls have risen at ATMs and other points of cash withdrawal. Even so, customers who first started using digital modes to pay their bills after the lockdown have proved to be a sticky set, market players said.
Payments gateway firm Razorpay found in a survey the current preference for cash is almost back to pre-pandemic levels, with close to 65% of customers still using cash to make payments.
The trend is especially pronounced in tier-2 and 3 cities, where the vast majority of shoppers — 80% — still prefer to pay via cash. Among tier-1 cities, Delhi has 72.4% of customers who prefer cash payments, followed by Hyderabad (68.3%) and Mumbai (58.5%).
Razorpay CEO and co-founder Harshil Mathur explained that with the supply chain getting disrupted as a result of the Covid outbreak, consumers are not too confident about placing prepaid orders on e-commerce portals.
“The reason CoD (cash on delivery) was down was that overall e-commerce volumes were down. One of the major reasons for its comeback is logistical delays, which has resulted in people not being certain about getting the product on time,” Mathur said. He added that despite an initial rise in prepaid orders, warnings of delays in delivery by e-commerce websites resulted in uncertainty in the minds of shoppers.
In rural markets, cash usage has increased as a result of higher withdrawals of money transferred by the government. Ashish Ahuja, chief operating officer (COO), Fino Payments Bank, said the bank clocked Rs 2,500-3,000 crore worth of micro ATM transactions last month and these numbers are higher than the pre-Covid levels. Footfalls have increased at withdrawal points as people now like to keep extra cash handy for purchases of essential goods. “Also, the cash being taken out via AePS has come down and so the number of visits has increased,” Ahuja said.
The ticket sizes were initially around Rs 2,500 and then they dropped to around Rs 1,800. “Now, it has started to come back. In months when you do not have government subsidies, it is at Rs 1,800, and in months when you do have them, the ticket size is about Rs 2,200-2,300,” Ahuja added.
Utility bill payments over online channels are holding up, though. While Fino said bill payments through both the self and assisted channels are up by about 5% from the pre-Covid levels, Razorpay said it has observed the growth in online bill payments to be 180-190%. “Even in tier-2 and 3 cities, elderly people are choosing not to step out to pay bills as they are most vulnerable in this situation,” Mathur said.
The increased use of cash started even before the lockdown was imposed in late March, according to the Reserve Bank of India’s (RBI) annual report. “The year (FY20) ended with a surge in pandemic-related rush to cash…the currency-GDP ratio increased to its pre-demonetisation level of 12% in FY20 from 11.3% a year ago, indicating the rise in cash-intensity in the economy in response to the pandemic,” RBI said. There was an unusual rise in month-over-month (m-o-m) CiC variation during March-June 2020 vis-à-vis the corresponding period in previous years. The intensity of cash demand was greatest in the month of May at close to Rs 1 lakh crore, against about Rs 20,000 crore in May 2019, the report said.