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Digital Payments: Paving the Way for a Prosperous Digital India 2.0
Digital payments are not just about convenient and secure transactions - they present a tremendous opportunity for the financial inclusion of 1/3rd of the country’s population that still remains ‘unbanked’
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Digital payments play the role of an equalizer when it comes to conducting financial transactions. In 2015, while launching the Digital India week, Prime Minister Narendra Modi had said: “I dream of a digital India where Mobile and E-banking ensures financial inclusion”. His vision is gradually coming to life with the new initiatives launched by the Modi-led Government. In addition to this, there are a growing number of innovative fintech companies offering various digital payment solutions, leading the total transaction value approximately to $50 million across digital payments this year, and is expected to reach $700 billion by 2022.
This monumental growth is being driven by the widespread acceptance of digital modes of payment, which is expected to reach 80% of the country’s urban population and 70% of retail chains over the next 4-5 years. Post India’s demonetization phase in 2016, there have been several policy and digital infrastructure changes including Goods and Services Tax (GST), financial inclusion and new payment systems such as Aadhar-enabled payments & UPI to further boost the digital payments sector. Moreover, the reduced transaction charges and the degree of ease of cash transfers associated with the electronic fund transfers and mobile banking are taking the digital payments industry to new heights.
Why Digital is the Way Forward
Digital payments are not just about convenient and secure transactions - they present a tremendous opportunity for the financial inclusion of 1/3rd of the country’s population that still remains ‘unbanked’. Moreover, through its various business models, it acts as an enabler for the booming startup ecosystem of India, while opening doors to investments in innovation.
Better Reach: By encouraging electronic payments in a predominantly cash economy, millions of unbanked Indians from across the country can be brought into the fold of banking.
Better Convenience: With the birth of new business models such as mobile wallets, prepaid cash cards, NFCs, QR Codes, mobile banking apps and traditional banks jumping into the fray as well, will contribute to willingness of people to go cashless.
Boost to Startups: Large scale integration will help acquire scale and reduce competition, increasing diversification and partnerships between banks and startups.
Boost in Investments: Since 2015, over USD 1.1 Billion has already been invested in the Indian digital payments industry with payment gateways and mobile wallets being key areas of interest.
The Bottom Line
Delinking of financial and geographical barriers - such as the recent move of RBI providing license to 11 companies to set up payment banks - could be the start of a cataclysmic digital shift in the economy. Just as digital payments in China leapfrogged to over $5 trillion in the past four years on the back of rising mobile and data penetration, this is India’s Big Bang moment to allow open-architecture and an interoperable payment system to evolve, in order to become a global player in the digital economy.
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.