SYNOPSIS India has seen a rapid surge in digital payments in recent years, fueled by a range of factors that have combined to create a perfect storm for the industry. Experts predict that this trend will continue, with digital transactions expected to reach a total value of $10 trillion within the next three years. In this article, we explore the various drivers of India's digital payment boom, examining the key factors that are powering the growth of this sector. |
Government initiatives and supportive policies One of the primary drivers of India's digital payment surge is the government's commitment to promoting digital transactions. Initiatives like demonetization, which saw the withdrawal of high-value currency notes from circulation in 2016, have encouraged consumers to adopt digital payment methods. Similarly, the rollout of the Goods and Services Tax (GST) has made it easier for businesses to accept digital payments, further boosting the industry.
The government has also launched various schemes like BHIM (Bharat Interface for Money) and UPI (Unified Payments Interface) to promote digital payments.
Easy-to-use payment solutions Another key factor behind the rise of digital payments in India is the growing availability of easy-to-use payment solutions. With the widespread adoption of smartphones, consumers now have a range of payment options at their fingertips, from mobile wallets to UPI-based payment systems. This has made it much more convenient for people to make digital transactions, driving adoption rates and encouraging further growth in the sector.
Digital awareness programs Digital payment is rapidly gaining popularity in India, with the government pushing for a cashless economy through various initiatives such as the Digital India campaign. However, with the increasing use of digital payment methods, it's important for people to be aware of the potential risks and how to use these technologies safely. This is where digital awareness programs come in.
According to the Reserve Bank of India (RBI), the number of digital transactions in India has increased, the collective efforts of the Government and all relevant stakeholders have led to a remarkable surge in digital payment transactions, rising from 2,071 crore transactions in FY 2017-18 to 8,840 crore transactions in FY 2021-22.
To address this issue, various digital awareness programs have been launched in India. For example, the National Payments Corporation of India (NPCI) has launched a digital awareness campaign called "UPI Chalega," aimed at promoting the use of Unified Payments Interface (UPI) for digital transactions. UPI is a real-time payment system developed by NPCI that allows users to transfer funds between bank accounts instantly.
Another example is the Digital India campaign, which aims to transform India into a digitally empowered society and knowledge economy. The campaign includes various initiatives such as the Digital Locker System, e-signature, and mobile governance, which encourage the use of digital technologies in various sectors.
In addition to these large-scale programs, many banks and financial institutions in India offer digital awareness programs to their customers. For example, HDFC Bank offers a "Secure Banking" program, which provides customers with information on how to use digital banking services safely and securely.
These digital awareness programs provide people with the necessary skills and knowledge to use digital payment methods safely and efficiently. They educate people on how to identify potential risks such as phishing, hacking, and other cyber threats, and provide them with tips on how to protect themselves from these risks.
The importance of digital awareness programs cannot be overstated, particularly in a country like India where the use of digital payment methods is rapidly increasing. These programs play a crucial role in helping people understand the benefits and potential risks of using digital payment methods, and how to use them safely and securely.
In conclusion, digital awareness programs are critical in promoting the safe and responsible use of digital payment methods in India. With the increasing use of digital technologies, it's essential that people have the necessary skills and knowledge to use these technologies safely and securely. By providing people with the necessary information and education, digital awareness programs can help ensure that India's transition to a cashless economy is smooth and successful.
Expansion of e-commerce The expansion of e-commerce in India has also been a major driver of digital payment growth. As more and more consumers turn to online shopping, there is a growing need for safe and secure payment methods. Digital payments provide a convenient and secure way for consumers to pay for their purchases, further boosting adoption rates and driving growth in the sector.
Grant Thornton predicts that the value of e-commerce in India will reach US$ 188 billion by 2025. As of 2020, India had a turnover of $50 billion in e-commerce, making it the eighth-largest market in the world, behind France but ahead of Canada.
The Indian e-commerce market is expected to continue its growth trajectory and reach US$ 200 billion by 2026, thanks to factors such as increased smartphone usage, the introduction of 5G networks, and a growing consumer base with higher purchasing power. In 2017, the e-commerce market in India was valued at US$ 38.5 billion.
Widely Available Payment Methods and Platforms: The availability of a wide range of payment methods and platforms has also contributed to the growth of digital payments in India. From UPI and credit cards to debit cards, net banking, and digital wallets, consumers have a wealth of options to choose from when making digital transactions. This has made digital payments more accessible to a wider audience, further fueling growth in the sector.
India's digital payments landscape has witnessed phenomenal growth, and the adoption of digital payments by tier-2 and tier-3 cities has been a game-changer. According to Amit Kumar, Chief Technology Officer of Easebuzz, "One of the key reasons for the sharp growth of online customers is mainly because of the widely available payment methods and platforms, such as UPI, credit cards, debit cards, net banking, wallets, Buy-Now-Pay-Later, EMI, etc. Similarly, the availability of cheaper data and affordable smartphones has also led to the rise of digital payments."
UPI Far Advanced Than Similar System In Use In Developed Nations:
In recent years, India has made significant strides in the realm of digital payments. Among its accomplishments is the development of the Unified Payments Interface (UPI), a system that enables seamless, instant transactions between bank accounts using a smartphone. According to a report by Inc42, India's UPI system is far advanced compared to similar systems used in developed nations.
The UPI system was launched in 2016 by the National Payments Corporation of India (NPCI), and since then, it has revolutionized the way digital payments are made in the country. As of August 2021, the UPI system has over 200 million active users, and the number is increasing rapidly.
Instant and Seamless Transactions
One of the reasons why UPI has been so successful is its instant and seamless nature. The system enables users to transfer funds instantly from their bank accounts to other bank accounts without the need for tedious paperwork or long waiting periods. Transactions can be initiated using just a mobile number or a virtual payment address (VPA), which is a unique identifier linked to the user's bank account.
Ease of Use
The UPI system is also incredibly easy to use. It is available on most smartphones and can be used by anyone with a bank account. Users do not need to be tech-savvy to operate the UPI app, which has a simple, user-friendly interface.
UPI vs Similar Systems in Developed Nations
According to the Inc42 report, India's UPI system is far ahead of similar systems used in developed nations. For example, the UK's Faster Payments System, which was launched in 2008, takes up to two hours to process transactions. In contrast, UPI transactions are completed in real-time, making them more efficient and convenient.
Similarly, the United States' Clearing House Automated Payment System (CHAPS), which is used for high-value transactions, takes up to two days to process transactions. UPI transactions, on the other hand, are completed within seconds.
Security Features
One of the major concerns when it comes to digital payments is security. The UPI system has several security features in place to ensure that transactions are safe and secure. For example, users need to enter a PIN to authorize transactions, and biometric authentication is also available.
Moreover, the UPI system has a feature called two-factor authentication (2FA), which adds an extra layer of security to transactions. Under this system, users receive a one-time password (OTP) on their registered mobile number, which they need to enter to complete the transaction.
Conclusion
India's UPI system is a game-changer in the world of digital payments. Its instant, seamless, and easy-to-use nature has made it a popular choice among consumers and merchants alike. The fact that it is far advanced compared to similar systems used in developed nations is a testament to India's technological prowess. With the UPI system continuing to gain momentum, India's digital payment ecosystem is set to become even more robust and efficient in the years to come.
Conclusion India's digital payment boom is being driven by a combination of factors, including supportive government policies, easy-to-use payment solutions, digital awareness programs, and the expansion of e-commerce. With digital transactions expected to reach a total value of $10 trillion within the next three years, it's clear that the growth of this sector shows no signs of slowing down. As more and more consumers adopt digital payment methods, we can expect to see further innovation and expansion in this exciting and rapidly evolving industry.
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