Moving towards electronic payments in India

Nowadays, the modernisation of payment systems is occurring throughout the world, the difference being the pace of modernisation in different countries. The question is no longer whether countries should adopt electronic payment instruments, as the evidence showing the cost efficiency that comes with them seems overwhelming, but rather, what the policy steps are in order to move faster towards their adoption. Certainly, India is not outside this reality. Indeed, the transition to electronic payments would lead to savings for the different segments of society in India, and would also lead to positive macroeconomic effects. This paper uses India as a case study in order to explore the shift paradigm from cash to electronic payments. The first part of the paper examines the cost issue from a theoretical perspective, showing how the cost inefficiency of cash can serve as an incentive in itself to persuade the Indian authorities to move away from its use. The second part provides policy recommendations on how the transition can be achieved in practice. More specifically, the recommendations for intervention are based on three grounds: financial inclusion; legal and regulatory framework; and innovative technology.