India's digital payments revolution (2023)

TonnegoOn Juhu Beach in Mumbai, five years apartQR-CodeCodes adorn every snack stand. Visit São Paulo in Brazil, Beijing in China or many other cities in emerging countries and you will find something similar. “Most people just want to use itUnited Press International,Govind, a seaside food vendor in Juhu, points to India's thriving payment network.

German uniform payment interface (Uniform interface) is a platform that enables free and fast transfers between accounts using fintech applications such as PhonePe or Google Pay. Unlike China's Alipay, it's open, so users aren't tied to one company and can make their financial history available to competitors, noted Praveena Rai, COO, National Payments Corporation of India (NpcI) that manages the platform. it consists ofQR-CodeCode or easy-to-remember dummy codeIDS.

Uniform interfacedrew the attention of the whole world. “Look at what India has achievedUniform interface, Aadhaar and Payment Stakes“, Sundar Pichai from GoogleDirector,shocked. In total, it will handle over $1 trillion worth of transactions by 2022, accounting for a third of India's transactionsBBP。This was compounded by the government's surprise "demonetization" in 2016, when several large-denomination banknotes were deactivated.Uniform interfaceIt also benefited as Covid made consumers scared of cash. It has grown from about 17% of the 31 billion digital transactions in 2019 to 52% of the 88.4 billion transactions in 2022. , boasting.

The Indian model inspired others. Launched in November 2020, Brazilian company Pix enables interbank payments for a small fee. It currently accounts for about 30% of electronic payments in Brazil (credit cards and debit cards each about 20%). This open instant payment system is an alternative to the rich world's bank/card model and China's closed fintech model. "We have shown that moving money is not expensive if you have a well-designed network," said Nandan Nilekani, co-founder of Indian tech giant Infosys and architect of India's Digital Stack.Uniform interface.

An even greater reward than efficiency is the opportunity for growth. Raghuram Rajan, former Reserve Bank of India (RBI) The governor noted that digital payments generate real-time data on sellers' deals and buyers' buying habits. This allows lenders or insurance companies to reach customers who may not have the financial history or sufficient assets to participate in traditional financing. As Patrick Collison of payments company Stripe puts it, “The less meaningful a borrower’s credit rating is, the more socially valuable lending is.”

digital development

Money in digital form has long been a source of progress in emerging markets. 2007M-give, a mobile money service launched in Kenya by telecom giant Safaricom. The user provides cash to a designated agent to top up the account associated with their mobile phonesim cardsMap. payment ofshort messageGift it to a friend, family member or shop owner.M-giveIt is now used by more than 90% of Kenyan households. This makes sending money to relatives who are further away much easier than before. When there is less friction in money circulation, consumer spending tends to increase. Academic estimates suggest soM-giveHas reduced extreme poverty in Kenya by at least 2%.

In China, Ant Group, a spin-off of e-commerce giant Alibaba, and its payment partner WeChat Pay have largely digitized payment transactions. Once the fintech giants have attracted consumers, they can use data-processing algorithms to offer loans and other financial services. Now, more than 90% of digital payments in China are processed through these two apps. Ant Financial was involved in more than 20% of short-term consumer lending in China prior to the government's recent actions. But Chinese fintechs have had several high-profile disputes with the government: Ant's planned IPO was blocked and lending to fintechs had to be scaled back. However, Christopher Beddor of China-based Gavekal Dragonomics said the worst attacks on the technology are over. In December 2022, Ant Financial received approval to raise $1.5 billion.

The Alipay model has been widely replicated elsewhere. payTM valueThe Indian fintech giant, which boasted a nearly $20 billion IPO in 2021, is trying to emulate Alipay by creating a similar closed-loop fintech ecosystem in India. Ant Financial is one of its largest investors. Grab and Gojek, two Southeast Asian super apps, have made similar attempts at digitization.

Saurabh Mukherjea of ​​wealth manager Marcellus said the benefits of digital finance tend to be greater in emerging markets than in rich countries. Because people in rich countries already have access to state-of-the-art financial services through well-managed accounting systems and pawnable assets. hope isUniform interfaceAnd similar systems are now allowing some poorer countries to bypass the West. The Indian government makes bank accounts available to almost all households under a program called Jan Dhan Yojana.Uniform interfaceEasier access. New payment systems could even trigger a credit boom.ErnstAccording to a consultancy, fintech lending in India will reach $270 billion by 2022, up from $9 billion a decade ago. This could be improved with account aggregation systems that allow users, like Europa's Open Banking, to share their financial history with competitors.

An open payment system could not produce another influential giant like Ants in China. Alipay charges a 0.1% fee for withdrawals above a certain threshold. Retailers pay an average of 0.55% of transaction costs. The credit department used to achieve comparable sales. Open payments reduce the chances of a similar Indian giant emerging, partly because it's designed that way. "NOUniform interfaceIf there's no tool to deal with it, we get things like Ant," said an Indian quip, citing the government's inability to curb monopoly abuse.

State aid is crucial for the success of open platforms. China's fintech boom is partly due to poor regulation. India's central bank is pushingUniform interfaceRetailers above a certain size must also accept this. It also requires no cost and subsidizes participants. Banco do Brasil is also entitled to offer Pix. While it's not free, the average fee for merchants is only around 0.2%, compared to over 2% for credit cards.

Competitive advantage

Proponents of the Indian system like to point this outUniform interfaceEncourage competition between fintech companies and banks. Consumers want the most widely used payment systems; Retailers also need access to commonly used products. Because of this, card networks or closed systems usually favor a small number of players. Visa and Mastercard dominate the rich world, while Alipay and WeChat Pay dominate China, giving them tremendous market power. Architect ofUniform interfacePix argues that their model breaks through this central trend. "We seeUniform interfaceas a public good,” said Ms. Rai vanNPCI.

However, the state-controlled zero-interest model also has disadvantages. Inadequate revenue is preventing banks and fintechs from investing in consumer protection, Indian bankers claim. “There are technology costs, maintenance costs, fraud and litigation costs,” one complained. "If there is no revenue stream, then why should financial companies bear all these costs?" asked Ajay ShahDVKForum, a think tank based in Mumbai. "It's a wake-up call... maybe the answer is to ask for more," the former Rajan said.RBIGovernor.

Ms. Lai repliedUniform interfaceZero costs drive economic growth. The government will compensate banks and some fintech companies with more than 20 billion rupees ($250 million) in grants to support public services in 2022Uniform interface.but that's a paltry 0.025% of the total value of the transaction and well below transaction costsUniform interfacesystem, said one banker. India's 2023 budget is set to be cut by about 25% despite calls to allow fees or increase government subsidies.

India's digital payments revolution (1)

Customer protection is affected. A study by Indian economist Renuka Sane and co-authors found that 18% ofUniform interfaceUsers have complaints about the system, such as fraud or wrong payments. Less than 30% saw their complaints resolved. Uttam Nayak, former Visa chief in India, remarked:Uniform interfaceThe transaction volume grew rapidly, the total transaction value did not increase as much. For larger items, consumers prefer more secure payment methods. "I useUniform interfacebuy firewood. But I wouldn't buy a plane ticket with it,” said an architect from Mumbai.

there are other shortcomingsUniform interface.Transaction success rates, a key metric that can drive higher spend, are lower than payment systems in developed markets. The exchange of financial data, which encourages competition between banks and enables access to credit, is slow to take off. Account aggregator association Sahamati found that the number of linked accounts had grown to 5 million by April 2023. But that number is small compared to the vast population of India.

developUniform interfaceFurther investments will be required. Ms. Rai pointed out that it provides a useful customer acquisition channel for banks and fintech companies that can capitalize on the data glut. "We see digital payments as a way to attract customers," said Harshjit Sethi, Managing Director of Sequoia India.The venture capital companyCompany. "Then you stack other financial services around it... it's like the holy grail of lending." Sameer Shetty of Axis Bank, one of India's largest banks, said, "Account aggregators really do exist."Uniform interfaceIt was in 2017."

But this change will only be possible if you let fintechs in. BhratPe is India's leading fintech company with a lending license. Others like AlipayTM value, Google Pay and PhonePe not. Politics can get in the way. a newspaper fromRBIConsider paying a higher value in August 2022. Known industry insidersNPCI, vonRBIThe former two were open to transaction fees, the Treasury Department said, but the government all but dismissed the idea.

No instant payment system is perfect, but UPI is a definite improvement over cash

Can government agencies successfully maintain this technologically advanced payment system? "What you want is to let the market rumble instead of picking a winner," said Mr Shah of the firm.DVKForum. "Uniform interfaceis the main topic. "Even the championUniform interfaceSee several required payment methods. A great man speaks of “concentration risk”. They pointed out that “ifNPCIand then shut down the entire payment system," he added, "might still be in play for a while."NPCI

No instant payment system is perfect, howeverUniform interfaceSignificant improvement over cash. MarchRBIroll outUniform interfaceAccess to the system can be expanded for feature phones equipped with buttons instead of a touchscreen. And it's spreading abroad. alreadyUniform interfaceBy integrating with Singapore's payment system, people can transfer money with a relatively low fee of 3%. India wantsUniform interfaceBecome a payment method abroad, just as Alipay is widely accepted outside of China. Ms. Rai said other countries may even adopt it entirelyUniform interfaceHeap. Mr. Nilekani wishesUniform interfaceEventually it will be everywhere. “If I go to Lulu in Dubai or Harrods in London, I need to be able to payUniform interface"This will certainly mean new competition for the banking/credit card giants in the West."


What is the digital payment solution in India? ›

Paytm is one of India's leading full-stack payments & financial solution provider. It offers services for consumers, offline merchants, and other online platforms.

Is India ready for digital payments? ›

Yes, India is ready for a cashless economy.

With major initiatives such as demonetization, Direct Benefit Transfers, BHIM and many more.

Is India's digital payments industry expected to reach USD trillion by 2026? ›

India's sector for digital payments could increase dramatically from $3 trillion in 2022 to $10 trillion in 2026. While there are still some obstacles in the way of further adoption of digital payment services, the potential for growth is clear.

How digital payments impact India? ›

Enhanced financial inclusion: Digital payments offer anytime, anywhere access to accounts, thus making it easy for citizens to receive payments in their accounts and to also make payments using their phone.

Do you think India is ready to go cashless? ›

Becoming a cashless economy may have certain challenges and concerns, but they do not outweigh the positive points. With the right strategies and implementation, India can easily pace up to becoming an efficient cashless economy.

Which country has best digital payment system? ›

India, which is driving the global digital economy, has already clocked about 70 billion digital payment transactions in 2022—the highest in the world.

What is the future of digital payments in India? ›

India's digital payments market will more than triple to $10 trillion by 2026: Report. Now, a global leader in the fintech space, India does not seem to be slowing down its pace in terms of disrupting traditional financial services.

Is digital India possible without cashless India? ›

With the improving technology every day, there's a rampant increase in online cheating and fraud episodes. If the government is unable to achieve sturdy and not-possible-to-hack digital systems, in a country like India with a 135 crore population, it is completely impossible to make the economy cashless.

Does India have more digital payments than China? ›

India makes more digital transactions than US, China, Europe combined: DPIIT Secretary. Updated - March 14, 2023 at 09:53 PM.

Is India a leader in digital payments? ›

In a span of just six years, India, primarily a cash-based economy, now leads the world in real-time digital payments, accounting for almost 40 per cent of all such transactions.

What will be the future of digital payments in the US? ›

Digital marketing firm Juniper Research has predicted that the use of QR codes for electronic payments in the US will increase by 240% from 2020-2025. In fact, the collective total of mobile payments surpassed $13tn last year, with most of that figure coming from QR code payments on the WeChat and Alipay apps in China.

Who has the fastest growing digital economies in the world? ›

ASEAN is the fastest growing Internet market in the world. With 125,000 new users coming onto the Internet every day, the ASEAN digital economy is projected to grow significantly, adding an estimated $1 trillion to regional GDP over the next ten years.

How has digital India helped us? ›

Digital India is a campaign launched by the Government of India to ensure that the Government's services are made available to citizens electronically through improved online infrastructure and by increasing Internet connectivity or making the country digitally empowered in the field of technology.

What are the major obstacles in India becoming a cashless economy? ›

The major challenges in the way of realizing a cashless economy to a large extent, inter alia, include cyber fraud, high illiteracy, mind-set, lack of trust in electronic transactions,lack of awareness about benefits of digital banking, large cash-dependent informal economy and also unavailability of digital ...

What country will likely be the first nation in the modern world to go cashless? ›

Sweden is regarded as the poster child of cashless countries and is expected to become the world's first cashless society by March 2023. This means that cash will not be a generally accepted means of payment in Sweden.

What happened when India went cashless? ›

There was a rush at banks and ATMs to exchange old notes and withdraw new currency. Queues at banks grew; many people suffered, especially the poor, who had no access to credit cards or mobile wallets; and dozens of deaths resulting from the crisis were reported.

What digital payment is used in USA? ›

Digital payments in the U.S. are centered around the use of credit cards – but other payment methods are about to challenge this dominance.

Which is the most used digital payments in India? ›

# Note: Digital payment modes considered are BHIM-UPI, IMPS, NACH, AePS, NETC, debit cards, credit cards, NEFT, RTGS, PPI and others.

Which is the most widely used digital payment in India? ›

Did You Know: PhonePe has the largest market share in the UPI ecosystem – 47.8% followed by Google Pay (33.6%) and Paytm (13.2%).
10 Best Online Payment Apps in India 2023.
Online Payment AppPlay Store Rating
Amazon Pay4.5
6 more rows
Feb 14, 2023

How many percent of India have digital money? ›

In India, 7.3% Of The Population Owned Digital Currency in 2021. Current Affairs » Economy and Finance » In India, 7.3% Of The Population...

Who started digital payment in India? ›

India. One of the first online payment systems in the country dates back to 1996, where the Industrial Credit and Investment Corporation of India (ICICI) began to offer their clients online banking services in their retail branches.

Who launched cashless India? ›

The Governor of the Reserve Bank of India (RBI), Shaktikanta Das, on Monday, March 6, unveiled the 'Har Payment Digital' mission, on the occasion of the Digital Payments Awareness Week (DPAW) 2023.

What are the disadvantages of cashless society in India? ›

Cashless society: disadvantages

Elderly people may be less comfortable with tech and less able to make the switch from physical currency. Rural communities could also be left vulnerable, because of poor broadband and mobile connectivity. People with low income or debt tend to find cash easier to manage too.

Which is the largest cashless economy in the world? ›

India to record highest number of cashless transactions in world: Jaishankar at Raisina@Sydney.

Is India outpacing the world in digital payments? ›

The value of digital payments in India will grow three-fold to touch $1 trillion by financial year 2026 compared to $300 billion in financial year 2021, according to a report by CLSA.

Which country is cashless? ›

Norway has the one of the lowest physical cash rates in the world, with only 3-5% of point of sale transactions paid for by cash. In 2021, Norway's central bank announcedthat it was exploring digital currency options to help facilitate the switch to a cash-free society.

What percentage of Indian transactions are cash? ›

Cash dominates the payments landscape in India, accounting for 59.3% of overall payment transaction volume in 2021 However, as a result of government initiatives, bank efforts, and growing consumer confidence in digital payments, Indians are shifting towards electronic payments and at some pace.

How much of the US money supply is digital? ›

According to an October 2021 piece by Harvard Business Review, over 97% of money in circulation is from online transactions. However, the digital money used is typically stored in a commercial bank ledger (or a public ledger in the case of cryptocurrency).

What percentage of Americans use digital payments? ›

According to McKinsey's research, digital payments penetration now stands at a very high level, with 89 percent of U.S. consumers using some form of them. Even more significantly, 62 percent of consumers queried for the survey reported using two or more forms of digital payment, up from 51 percent in 2021.

How long before we are a cashless society? ›

A cashless future enabled by technology

We may not be a cashless society by 2060, much less by 2030. But the fact is we're closer to becoming a nearly cashless society every day. The transition from a mostly cash to nearly cashless society didn't happen overnight.

Which country has the largest digital market? ›

For digital marketers, the US is a great choice due to its sheer size and population. There are numerous opportunities available in this country as it has one of the highest internet usage rates in the world.

Which country is top in digital transformation? ›

2022 results
2022CountryRanking Change
59 more rows

Which country is the largest digital market in the world? ›

According to a June 2020 estimate, the United States was the largest digital advertising market worldwide with a spending of 134.66 billion U.S. dollars, followed by China with over 75 billion and the United Kingdom with 19 billion.

Which one is the positive impact of digital revolution? ›

Social Impact of the Digital Revolution

They are detailed as follows: Positive aspects: Greater interconnectedness. Easier communication.

How is India in digital quality of life? ›

Digital Quality of Life Index 2021 - India Ranks at 59th Position.

What is the economic progress due to digitalization in India? ›

India's digital economy grew 2.4 times faster than the economy between 2014 and 2019 generating around 62.4 million jobs, said a paper published in the latest bulletin of the Reserve Bank of India. In absolute terms, the size of the digital economy has grown from $107.7 billion in 2014 to $222.5 billion in 2019.

Which sector is most benefited from digital India? ›

It's likely that any Information Technology service provider will benefit the most from the Digital India program. However, 'IT' is an umbrella term for many other services that can be divided by sector.

How important is digital marketing in India? ›

Digital marketing is the best option to market your products at a lesser cost. With the increased digitalization in the last decade, digital marketing has become essential for all businesses to ensure their growth.

What is the new digital payment system in India? ›

The Unified Payments Interface (UPI) has been the flag-bearer of India's fintech revolution - launched in 2016 by the National Payments Corporation of India (NPCI). The UPI is an instant real-time payments system that enables inter-bank peer-to-peer and person-to-merchant transactions through mobile devices instantly.

What payment method do India use? ›

Over 900 million debit and credit cards mean that plastic dominates the payment landscape. Five major card schemes operate in India, including the locally ubiquitous RuPay. Online banking, direct debits like UPI, and wallets like Paytm are growing in popularity.

What is the new payment system in India? ›

UPI is a digital public infrastructure created by the National Payments Corporation of India (NPCI). It connects more than 300 banks and enables seamless financial transactions through various mobile applications such as Google Pay, Amazon Pay, Paytm, and PhonePe.

Is Digital India possible without cashless India? ›

With the improving technology every day, there's a rampant increase in online cheating and fraud episodes. If the government is unable to achieve sturdy and not-possible-to-hack digital systems, in a country like India with a 135 crore population, it is completely impossible to make the economy cashless.

Who is the leader in digital payments in India? ›

UPI has become India's leading digital payments platform, growing at an enormous rate of 427 percent in transaction volume between March 2020 and August 2022.

Who controls digital payments in India? ›

The Reserve Bank of India (“RBI”) is the major regulatory organization in India in charge of supervising digital payments in India.

How many people use digital payment in India? ›

India currently has around 350 million online transacting users across e-commerce, shopping, travel and hospitality, and OTT and the number is set to double by 2030, a new report showed on Wednesday.

Which payment method is mostly used in USA? ›

Credit and debit card payments are the most common payment type.

How do people pay online in India? ›

Digital Payment Methods
  • Banking Cards.
  • USSD.
  • AEPS.
  • UPI.
  • Mobile Wallets.
  • Banks Pre-paid Cards.
  • Point of Sale.
  • Internet Banking.

Which is the most popular payment method in India? ›

Debit/Credit Cards

This is the most convenient way of transacting, whether in-store or online. Certain online stores in India offer customers discounts if they pay with a credit or debit card.

Which payment system is most used in India? ›

Both Paytm and PhonePe ranked as popular digital payment methods in India in 2020 and were more commonly used than credit or debit cards for online shopping.


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