Would you be surprised if I tell you that the digital payments industry in India is projected to soon constitute at least 10 percent of the global payments market? The digital payments economy in the country received a major push in the form of the government’s Cashless India initiative – launched under the Digital India campaign. In an effort to transform the country into a “less-cash” society, the government has been promoting the use of digital payment methods such as banking cards, Unstructured Supplementary Service Data (USSD), mobile wallets, internet banking, mobile banking, Aadhar-enabled Payment Systems (AEPS) and micro ATMs. Combine these government initiatives with drivers such as increasing penetration of smartphones and other devices, and what you get is a burgeoning digital payments landscape in India.
A recent report by Credit Suisse stated that the digital payments market in India is expected to reach $1 trillion by 2023. Incidentally, the global payments market itself is growing at a rapid rate and is expected to cross the $2 trillion mark by 2020, according to NASSCOM. What are the major trends in this rampant growth of digital payments in India?
The payments trends can be clubbed into three broad categories: government initiatives, rise of innovation and digitalisation, and proliferation of smartphones. The government initiatives to encourage a cashless society have played the role of a catalyst in the shift towards digital. Besides cashless, the government also aims to make the country “faceless” and “paperless”, through extensive digitalisation. Due to this, new business models have been developed in recent years – with mobile wallets and cash cards becoming a common feature. The National Payment Corporation of India(NPCI) launched Unified Payments Interface (UPI), a one-touch transaction for transferring money between parties using a “unique virtual address,” which has been widely adopted by banks and fintech companies. Bharat Interface for Money (BHIM), an extension of UPI and USSD, enabled digital payments through UPI. According to NASSCOM, new bank licenses and well-funded fintech solutions are making it possible for users to make an affordable transition to digital.
Innovation has been one of the biggest drivers for the growth of India’s digital payments economy. Rampant urbanisation has played an active role in pushing Indian consumers to look for personalised and highly convenient services across every segment and different technologies are being applied to solutions in order to meet that demand. India is one of the countries with the most advanced and innovative payment instruments; it even ranks No. 1 on FIS’ payment index. Automation, robotics and augmented reality have entered the daily workings of banks and financial institutions. Everything from the use of Smart Cards to Smart Security, to enhanced mobility and data-driven solutions are coming together to ensure that India adopts a sophisticated payments system. Besides, the desire for a “connected living” has also brought innovation to the forefront of the payments market.
Along with the increasing adoption of smartphones, the availability of affordable mobile internet is doing wonders for the digital payments market in India. As per the findings in the report by Credit Suisse, the data usage for 300 million Indian smartphone users jumped from 1GB to 5-10 GB per month in the last year. What has further spurred this trend is the proliferation of mobile apps with easy-to-use interfaces, which is directly proportional to customer experience. With WhatsApp, the most widely used messenger app in the country with almost 200 million users, rolling out its payments feature (currently available only in the India market), a peer-to-peer system based on UPI – India seems all set for a digital payments revolution.
Digital payments in India to reach $1 trillion by 2023: Credit Suisse
(This article has been contributed by Saudhamini Goudar. Saudhamini works as a Communications Editor with Fidelity Information Services, Bangalore and her interests mainly revolve around words, food and keeping the creative spark alive.)