Mobile Point of Sale: Benefits to Indian Economy

I am currently researching on Mobile Point of Sale technology. Here in this post you will get to know the benefits of mPOS to Indian Economy.

1.     Conversion of cash based economy to less-cash economy:

For cashless transactions to be ubiquitous, card swipe machines have to be ubiquitous.

As mPOS devices are cost effective, we can use these devices to extend the reach of mobile (cashless) paymentsthat are currently not accepting cards due to high costs of POS terminal. We can use it in small merchant establishments and decrease the dependence on cash.

Currently only 5% of thetotal transactions are card based transaction and hence mPOS is having huge scope to increase further.

2.     Benefit to currency management:

As stated above card transactions constitute only 5% of the total transactions in the country.

This large cash dependence (95% of retail sales) imposes huge pressures on currency management.

Currently, cost of printing banknotes are to the tune of Rs.2,800 crore annually and card usage at POS leads to about Rs.140 crore of savings in currency management. Thus from above data we can easily conclude that every additional 1% increase in the use of cards in retail sales, will lead to Rs.28 crore savings in note printing cost.

So for increasing card transactions at POS terminal, mPOS can emerge as a very good mode which is very cost effective and can spread across the country very rapidly.

For your reference please find below the image which gives cost of printing a note:

3.     Cashless payments in rural areas:

As mPOS devices can run over GPRS network(which has greater reach in Indian context) and on feature phones(used most in Rural areas), mPOS can be used in small towns and rural areas which will enable cashless payments in rural areas eventually.

4.     Addressing under-utilization of debit cards:

According to data, India had about 0.5 million point-of-sale (POS) terminals in 2009-10 and on an average there was less than one debit card transaction. Major contributor to this issue(under-utilization of debit cards) is high cost of POS terminals which restricts the card acceptance in small merchant establishment. This same issue is getting addressed by mPOS where it costs as low as Rs.1500.

5.     Helping government to monitor transactions:

mPOS will help recording financial transactions extensively. Hence it will aid to the government in its effort to collect appropriate tax revenues;  it can effectively detect, and help curtail, illegal transactions; also it will give us a better estimate and understanding of the huge unorganised sector in India; and last, but not least, it will help plug the “leakages” in various government programmes.

6.     New revenue channel for banks:

Currently most of the debit cards are used to withdraw cash from ATMs. For a card-issuing institution like a bank, increasing card usage on mPOS will become beneficial,  as instead of having to invest in more ATMs, it would earn transaction fees.