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Current Challenges And Growth Prospects In Digital Payment Industry

The RBI has created an environment that pushes digital payments while putting the interest of the consumer first

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In terms of digital payments, India is still fairly nascent when compared to some other countries. However, that is not a negative by any stretch. One needs to understand that the whole concept of digital payments is still a bit new unlike advanced countries where digital payments have been part and parcel of the ecosystem for many years now. That said the growth of digital payments in India and the pace of adoption has been tremendous.

When it comes to the adoption of new technologies, India has had the advantage to leapfrog to more advanced payment technologies. In terms of acceptance, there has been a move to try and experiment through multiple different channels – time will tell which channels work but history will tell us that the winners will be those that will create a seamless experience. Consumers too have been adopting to digital transactions/payments in a big way. If one looks at the data, the numbers of credit and debit card transactions have been growing at a rapid pace. The UPI data also shows the rapid adoption of digital transactions/payments. A fair assumption is that it is continue to clock this sort of growth. Apart from this, e-commerce transactions’ (excluding Cash on Delivery) have been clocking incredible growth and is set to continually do so.

India also has the advantage of having a favourable regulatory climate. The RBI has created an environment that pushes digital payments while putting the interest of the consumer first. The government has also been doing its bit to ensure that digital payments continue to grow in a big way.

The potential for growth is tremendous. We have barely touched a fraction of this potential – consider that cash still accounts for well over 90 percent of all transactions made as payments for goods and services. This is evinced by foreign players entering the market in droves and investing a lot of money.

Like any growing industry, there are still some challenges. Some of them are:

* Asset costs – Prices of payments acceptance devices are still fairly high to penetrate down to lower tier cities
* QR decals – our experience is that merchants have not taken to QR decals as one would have expected them too. Maybe time will tell how this will pan out but in the short term, it is still yet to work.
* Omnipresence of cash – the level of cash has gone back to demonetization levels. The comfort that people have with cash payments will hinder the growth in digital payments in smaller cities and towns
* P2B transactions – While we have seen tremendous growth in digital transactions, the majority are still not payments for goods and services. How this barrier will be crossed will be interesting to observe but it will be crossed with the passage of time.
* Risk – with the growth in digital payments and transactions, there is also an added risk which can be mitigated through sustained monitoring

While we are certainly seeing a revolution in digital payments in India, real sustainable growth will come only when digital payments penetrate into small towns and cities and when it comes a way of life to do digital payments.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.


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Deepak Chandnani

Deepak Chandnani, CEO of Worldline South Asia & Middle East.

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