Digital Payments In India: Current Challenges And Growth Prospects

-

·       The Indian economy continues to be heavily reliant on cash
·       Digital payment systems are heavily reliant on smartphones that are enabled with data connections, NFC, Bluetooth, etc.
·       The solutions available now are catering to individuals who are already well versed with cashless transactions through credit/debit cards and net banking
digital-payments.jpg (690×518)
https://i0.wp.com/inc42.com/wp-content/uploads/2018/07/digital-payments.jpg?fit=690%2C518&ssl=1
Post the implementation of demonetization in November 2016, the use of digital payment methods in India received a major boost. According to the National Payment Corporation of India (NPCI), the value of the BHIM Unified Payments Interface (UPI) transactions skyrocketed to INR 1 Tn while the volume of transactions reached 913 Mn, up from a meager 7 Mn in April 2017.
One would imagine that this massive growth of digital payment methods would consequently lead to a decrease in the use of cash. However, in spite of all this, the cash in circulation as of June 22, 2018, was only 9.8% more than it was on June 23 in 2017. This indicates that even though there is a greater appetite for digital payment systems, the Indian economy continues to be heavily reliant on cash.

Need For Low Cost, Interoperable Infrastructure

This continued dependence on cash persists due to certain challenges deeply rooted in the digital payments ecosystem in India. These ingrained issues can be largely attributed to a lack of adequate infrastructure. In the current scenario, digital payment systems are heavily reliant on smartphones that are enabled with data connections, NFC, Bluetooth, etc. Out of India’s 800 Mn mobile phone users, only 200Mn only use smartphones. Of these phones, only 6 Mn are NFC-enabled.
digital-payment.jpg (1000×667)
https://www.pymnts.com/wp-content/uploads/2017/04/digital-payment.jpg
An even smaller percentage of users have access to QR code mechanisms. This translates to approximately 85% of Indians who do not have access to the infrastructure required to adopt the current digital payment systems that are heavily reliant on smartphones. There is a dire need, therefore, for a more interoperable and universal method of digital payments in the country.
Additionally, the hardware and software required to adopt the current digital payment infrastructure are bulky and expensive. A lot of retailers are resisting adoption due to these high costs and continue using cash. In a developing country such as India, people would rather carry bulky banknotes than pay extra just for using digital payment methods. Demonetization pushed Indians towards switching to cashless methods which come with veiled costs galore, but as soon as the pressure reduced, Indians were back to using cash

Boosting Innovative Startups For A Digital Future

While the government and digital payment companies push for a cashless economy, the pitfall probably lies in the lack of a protocol pertaining to the implementation of digital payment methods. While technologies are abundant, their penetration is lagging and while innovative startups that can reduce the cost burden on users are present, adequate support for their growth is scarce.
The solutions available now are catering to individuals who are already well versed with cashless transactions through credit/debit cards and net banking.
Innovative startups that disrupt the existing digital payments landscape with payment technologies entailing low cost adoption models, will level the playing field and promote financially inclusion. There are some innovative solutions that are currently looking to resolve this the technology-utility gap to make digital payments accessible.
Dynamic startups are leveraging advanced technologies which use other means of communication – like sound, for instance – to facilitate digital payments. Since all mobile phones are capable of producing sound, they can be used for digital payments without the need of the internet, cameras, or expensive equipment, which are required for mobile wallets or QR code systems.
digital-wallets.jpg (1157×1390)
https://www.eaccountable.com/wp-content/uploads/2013/04/digital-wallets.jpg

Government efforts towards the elevation of these cutting-edge, novel technologies and they're systematic penetration among the masses will inevitably lead to a boundlessly prolific cashless economy. It is important to develop an ecosystem that nurtures innovative startups and players with unique offerings to encourage Indians to embrace a cashless economy.

Comments

Post a Comment

Popular posts from this blog

5 Turning Points in the History of E-Payment

-
Image
Have you ever imagined how the world would look like if we had to pay for goods with a grain or the animals we’ve just hunted? For thousands of years, it was the reality we had to cope with. Luckily, these days are over and electronic payment methods (e-payments) are now available for everybody and are an important part of our day to day activities and life. Nowadays paying for goods and services is really convenient – it can be as easy as a one-time click. https://www.nonprofitpro.com/wp-content/uploads/sites/8/2017/02/1_OnlinePayments.png It’s obvious that the development of e-payments is closely related to online commerce and follows the improvements in that field. As you probably know and experienced, e-commerce is extremely convenient and online payments  are way more suited to customer’s requirements than traditional payment forms, like cash. There are a variety of payment methods today, such as online banking, credit, and debit card, charge card or e-wallet, but ta
Read more

How to Protect Your UPI Transactions

-
Image
https://learnmyselfblog.files.wordpress.com/2017/12/upi-blog.png With increased online payments it is important to know how to protect your UPI transactions from cyber fraud, and the RBI vouches for it.                                                                                                                                       On February 14, the RBI issued a warning to all banks, customers and online payment platforms about digital payment frauds on UPI transactions. The RBI warned users from downloading an app called  AnyDesk.  The app asks for permission to access information on a user’s phone. Once granted, it steals confidential data from the phone and could also potentially wipe out the user’s bank account. How do you know your payments app is safe? How can you protect your  UPI transactions ? Here are a few simple yet foolproof tips to protect your UPI transaction from fraud:  Accept requests from verified merchants or sellers only                      
Read more

Payment fraud on the rise in India with E-commerce growth

-
Image
As more Indians step up to make online payments, there is a proliferation of payment gateways and mobile wallets, many of which are facing the risk of being misused by unscrupulous merchants. https://analyticsindiamag.com/wp-content/uploads/2017/10/thirdwatch.png Payment service providers like  Citrus Pay  and  PayU  claim the low-interest rates offered by payment gateways — 1% compared with up to 3% — charged by  credit card  companies is being taken advantage of by several small traders who set up online stores and withdraw money citing fake transactions. “We have lost Rs 4.5 lakh on account of fraud out of which one e-commerce merchant sold a used ‘car’ worth Rs 1 lakh to himself by his credit card,” said Nitin Gupta, CEO of PayU  India , one of India’s leading payment gateways, which has over 30,000 e-commerce merchants registered with it. Cash withdrawal at an  ATM  in India through a credit card is charged at about 2.7%-2.8% monthly, which on an annualized compound
Read more