Digital Payments : The future of transactions in India

When demonetization was announced last year in November, suddenly the debate shifted to ability of India to adopt cashless economy. Many of experts raised concerns against the Government’s promotion of “Digital India” being too urban-centric and narrow in approach. But the Government adhered to its vision and took many steps to facilitate digital payments.

Digital payments are methods to transact between parties electronically which are fast and secure. Banking cards, USSD, AEPS, UPI, Mobile wallets, PoS, Bank Pre-paid cards, Internet Banking, Mobile Banking, Micro ATMs, etc. are few means of digital payments which are easily available and accessible. Hence these modes are being given preference over cash system. The Government also plans to tackle the menace of corruption, black money and terrorism through such steps. The key question remains : that will the rural India or interiors adapt to such a leap in technology?

It is no secret that the tech-savvy class in metro cities has more or less been running on digital payments mode for some time now, be it for paying a cab ride, food ordering or for recharge of their mobile numbers. These means started penetrating to other smaller cities like Jodhpur, Patna, Allahabad, etc. over last few years. However post demonetization, there was a rapid jump in the digital payments and many service provider companies multiplied their customer base. There was steep rise in the download of apps like Paytm, Phonepe, SBI Buddy etc. Both customers and sellers adopted digital payments. Even the street vendors started using digital means to accept payments.

Presently there is a real rural-urban divide in digital payments adoption and usage. But looking at the brighter picture, almost 100 million rural Indians will have smartphones by end of this year who can use it for payments mode. Rural India will greatly benefit from JAM Trinity (Jan Dhan-Adhar-Mobile) strategy of the Government and now direct transfer benefits will become a reality. Schemes like MGNREGS are already using direct transfer to beneficiaries avoiding leakages, and if these people can use their smartphones then the dream of cashless and digital India is not very far.

The Government has been working on a war footing to promote a digital and cashless economy. These include –

  • Approval of the Pradhan Mantri Digital Saksharta Abhiyaan (PMGDISHA) to make 6 crore rural households digitally literate.
  • Organizing scores of Digi Dhan Melas to create awareness among people to use digital means for payments
  • Initiation from NITI Aayog for schemes such as Lucky Grahak Yojna and Digidhan vyapar yojana to use BHIM (Bharat Interface for Money) app for digital payments.
  • Many ministers of the Union Government have themselves taken the lead to promote it and urged people to go digital.

Such positive steps by the Government are laudable and present a strong case for India’s effort at going digital.

According to Indian Council for Research on International Economic Relations (ICRIER) Survey, if mobile penetration increases by 10% then GDP would increase by 1.2%. If broadband connection increases by 10% then GDP would rise by 2.7%. If all the Government services are provided through mobile phones then the GDP would increase by 3.2%.

The case for a digital India and it’s long term benefits are strong. The future of digital payments is very bright, and the numbers support it. India is experiencing a remarkable growth in digital payments. In 2015-16, a total of Rs. 4018 billion transacted through mobile banking as compared to Rs. 60 billion in 2012-13. The percentage of the digital payments through other modes is also increasing at a significant speed. We will surely witness a “digipay revolution” very soon as India has more than 100 crore active mobile connections and more than 22 crore smartphone users as of March 2016.

Abhishek Ranjan is a Research and Policy Analyst to Members of Parliament (MPs) Mr. Ninong Ering and Mr. Dilip Tirkey. He is also working as a Consultant to University of Chicago’s Delhi Center for Anubhav Lecture Series, and is a Policy Consultant for FinTech startup Credy. Earlier, he was a LAMP Fellow and graduated in Engineering from Manipal Institute of Technology.

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