Electronic transactions keep cheque deals under check

Only 10 per cent of value transacted in 2011-12 were via paper transactions

Fewer Indians seem to be going the old-fashioned way of writing out a cheque, opting instead for the more convenient electronic transaction.

Data from the Reserve Bank of India (RBI) show retail banking through electronic channels accounted for almost 90 per cent of the value transacted in financial year 2011-12, a sharp increase from below 30 per cent in 2005-06, with the rest being via paper transactions — which would include cheques and demand drafts. The amount transacted through the electronic mode increased 70 per cent in 2011-12 against the previous year.

Cheque usage fell from 1,387 million transactions in 2010-11 to 1,341 million in 2011-12. The amount cleared through cheques also fell from Rs 101 lakh crore in 2010-11 to Rs 98 lakh crore in 2011-12.

Within electronic channels, debit cards have found their way into most wallets and are gradually replacing cash. In March 2012, transactions through debit cards constituted 28 per cent of the volume transacted electronically, followed by credit cards with 26 per cent. There are about 600,000 point-of-sale terminals across India that facilitate receipt of payments at retail establishments through cards.

With a majority of commercial banks having set up virtual offices, internet banking is also gaining ground. “People are finding it easy to make payments and fund transfers online, rather than leave the comfort of their home or office to find the nearest branch,” said a senior official of a large public sector bank.

According to an official from HDFC Bank, three to five per cent of their retail transactions per month are conducted by online banking services. “Banks in India still have the ‘physical presence’ model that they try to replicate online. To succeed, banks need to move to an independent online business model for customer acquisition,” said Sanjay Tugnait, head of financial services for Accenture in India.

Thanks to social networking websites, all a customer needs to do to attract attention is to post a comment or two and tag — or link it to — the bank. Large private sector banks, such as ICICI and HDFC have dedicated pages on Facebook and Twitter. Some banks even provide a complaint number to follow up on a comment made by a customer on these sites.

Other than that, the sheer number of potential customers in the social networking space on the world-wide-web attracts financial institutions. Banks conduct polls on customer service, post content and tips on financial literacy and promote new products.

For instance, internet banking got the most number of votes when ICICI Bank asked Facebook users which channel they’d used for banking in the past 30 days.

These days, even a mobile phone can be used to make utility payments, send money or check account balances. Most large banks have specialised applications that can be installed on a customer’s mobile phones. Data from the National Payments Corporation of India shows 42 banks have joined the Interbank Mobile Payment Service platform that facilitates mobile banking. About 3.4 million mobile money identifiers (or number of customers registered for mobile banking) have been issued so far.

To give a boost to mobile banking, RBI has withdrawn the cap of Rs 50,000 a day per customer with effect from December 2011.