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Digital retail transactions stabilise at higher level

The total value of digital retail transactions [from four modes debit/credit cards at points of sale (PoS), prepaid payment instruments (PPIs), immediate payment service (IMPS) and unified payments interface (UPI)] increased from less than Rs.500 billion in mid-2015 to Rs.750 billion by August 2016 – implying a growth of more than 50 per cent.  With high-value note ban in November 2016, retail digital transactions got a one-time boost in December 2016 and crossed Rs.1400 billion. However, the aggregate value of transactions has stagnated since then, with total value at Rs.1479 billion in May 2017, according to a report by Motilal Oswal Securities. Similarly, total number of transactions (txn) almost trebled from 300 million in mid-2016 to its peak of 847 million in December 2016. In May 2017, total transactions are estimated at 830 million.

A look at the four modes of digital transactions reveals that PPIs (including mobile wallets such as Paytm, MobiKwik, etc) have witnessed the highest growth in business. While POS and IMPS transactions increased 70 per cent and 58 per cent since November 2016, PPI transactions increased by about 190 per cent. In other words, PPI transactions, which were less than half of POS transactions pre-demonetisation, were 94 per cent of POS transactions in April-May 2017. Also, with cash crunch easing, ATM cash withdrawal has moved back to Rs.72 billion per day, matching the pre-demonetisation levels.

Due to demonetisation, the share of digital transactions increased from 0.51 per cent in GDP in 2QFY17 (quarter ending September 2016) to 0.93 per cent in 3QFY17 but eased to 0.82 per cent in 4QFY17.

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