Bye-bye cheques, hello electronic payments

Electronic transactions are making rapid strides, with more and more of us abandoning cheques and cash in favour of Internet banking and cards.

Reserve Bank of India data for retail electronic payments show that in 2010-11, the total value of electronic transactions almost doubled that of the previous year. Again, between April and November 2011 the value transacted was 72 per cent more than in the same period the year before.

Electronic payments involve money transfers into other accounts as well as direct debits for payment of utility bills, insurance premia, and so on. They also include direct credits into your account for dividends, etc., and payments made through debit and credit cards each time these are swiped at stores.

Pushing for the internet

Banks have been trying to route routine transactions away from their branches, pushing for customers to take to Internet banking. The ATM too has graduated from a cash-dispensing machine to a mini-bank, where electronic payments can be made.

Among various electronic transactions, online transfers to other accounts through the National Electronic Funds Transfer (NEFT) have been doubling each year for the past four years. Considering the total value transacted, the growth rate has moved from 81 per cent in 2007-08 to 129 per cent in 2010-11. Between April and November this fiscal, the value transacted has increased 104 per cent over the same period last year.

However, direct debits from accounts — such as for telephone or electricity bills, premiums, and so on — have not shown a similar rapid growth. From a high 92 per cent growth in 2007-08, the growth in these transactions in terms of value slowed down to 6 per cent in 2010-11.

Debit card boom

The slowdown of 2008 dealt a severe blow to credit card transactions, from which a recovery has still not happened. As banks — and consumers — became wary of spending, the number of credit cards in circulation dropped 10 per cent in 2008-09.

In every year since then, the number of credit cards has been on a decline. Still, the people who do have credit cards have been spending more in the past year-and-a-half. The total amount spent through credit cards declined only in one year — 2010-11.

But debit cards haven't had as much of a hard time. Debit card growth has roundly trounced growth in credit cards over the past few years, recording over 40 per cent growth rates over the past four years.

But consumers still appear to be sticking to credit cards to make big-ticket purchases. Though the gap in the number of swipes is narrowing, the total amount spent through credit cards is still well above that in debit cards.

acharya@thehindu.co.in