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A cashless economy has huge opportunities, but the challenges are as daunting.

- Vandana

Vijay Shekhar Sharma, founder of the e-wallet service Paytm, was amazed during a recent trip to the US by the ease with which he could pay for his tuk-tuk ride (an electric version of the three-wheelers common in Asia debuted in the US last year). “We did not need to have cash, swipe a card or have a US-based wallet. Instead, the guy just asked for our debit card number, did something on his phone and voila! the payment was done,” said Sharma.

He returned to India and in two days Paytm was ready with a product similar to what he saw in the US. This innovation made the Paytm app work like a point-of-sale machine. Small merchants and vendors who cannot afford a POS machine can simply download the app and start accepting payments. This is kind of a game-changer, as there are more than 75 crore credit/debit cards in India but only 15 lakh POS terminals that accept those cards.

There has been a deluge of such innovations after Prime Minister Narendra Modi started pushing for a cashless economy after demonetising Rs 500 and Rs 1,000 notes a month ago. Banks have been asked to promote cashless transactions.

Everyone from digital wallet companies and banks to POS makers and payment gateway providers are in the battleground of digital transactions, fighting to get the best out of the buzz that has been created. The focus is no longer on branchless internet banking; today it is all about mobile platforms. All these players are riding on the increasing smartphone penetration. India has some 35 crore smartphone users, and the number is projected to go past 70 crore by 2020.