India is seeing a payments revolution. In a country believed to be cash dependent and resistant to change, the spread of electronic modes of payments is nothing short of revolution. Prime Minister’s Digital India program is not only about e-governance and spread of internet services but also includes development of electronic and digital payment systems to reduce the prevalence of cash in Indian economy.
While the government may announce any amount of measures, the proof of the pudding lies in the eating. The data released by RBI and National Payments Corporation of India (NPCI) about the growth in various modes of payments is the ultimate touchstone of the success of electronic payments. The following trends were seen from the data released.
United Payments Interface (UPI)
It was introduced in 2016 as a platform that can be used to transfer money from a bank account to any bank account. This is improvement over the other mobile wallets as you need only a UPI virtual address and PIN to initiate a payment, and not credit/debit card details, IFSC or account number. It also means the government is trying to leverage the spread and reach of smart phones in India, since UPI based apps function from mobiles. Government’s own BHIM App and other private players like PayTM, GooglePay, PhonePe have been leaders in promoting UPI in India.
The progress is self-evident-
There has been a stupendous 127 times rise in value of money transferred via UPI in just three years. This reflects the faster adoption of this mode of payment, showing the openness of Indian people to better technology.
Aadhaar-enabled Payment System (AePS)
It is a common belief that Aadhaar is just another “card” used for identification. Modi government has leveraged the Aadhaar for multiple purposes from targeted benefit delivery to weeding out corruption. One more innovative way of utilizing Aadhaar is to use it for banking purposes.
Aadhaar Enabled Payment System is a payment service empowering a bank customer to use Aadhaar as the identity to access his/ her respective Aadhaar enabled bank account and perform basic banking transactions like balance enquiry, cash deposit, cash withdrawal, remittances, etc.
The graph yet again reflects the remarkable increase in use of AePS as a preferred mode of payment for Indians.
Increase in use of plastic money
It mainly involves usage of credit and debit cards for transactions. The rise of e-commerce, prevalence of online utility bill payments like electricity bill, mobile bill, etc and use of cards to swipe at billing counters.
There was a perception that Indians don’t trust card payments but prefer to carry cash. This perception has been proven wrong with the steady increase in the number of debit cards held by Indians. The debit cards outstanding have more than doubled since 2013-14.
If we look at the value of money transferred, it also has doubled from about Rs 20 lakh crore in 2013-14 to Rs 39 lakh crore in 2018-19.
Increase in Point of Sale transactions
If the cards have increased, it is bound to increase the Point of Sale transactions. It also can be inferred that PoS transactions are mainly at the retail level which can indicate the spread of PoS at the grassroot level like local shops, stores, restaurants, etc.
One interesting thing revealed by the graph is the steep increase seen in 2016-17. This was a direct result of demonetization which acted as a nudge to merchants to adopt PoS machines. This is confirmed by data from finance ministry that the quarter of January-March 2017 saw 12.54 lakh PoS machines.
Role of RuPay cards
Card payment industry is dominated by foreign card companies like Visa and Mastercard. India has systematically placed RuPay card as a tough competitor to these card companies. A statement by RuPay says about 60 crore RuPay cards have been issued with 33% of the total market of card transactions.
This fact is confirmed by the rise in transactions (both e-commerce and point of sale) using RuPay cards.
Plateauing use of cheques
Cheques have been a time-tested mode of payment. Indian banking system introduced the Cheque Truncation System for faster processing of cheques. But have the paper cheques been able to sustain in this rising tide of electronic payments?
Data reveals that although the value of cheque payments has increased, the growth has plateaued. The growth in volume of cheques issued is also flat. This shows shifting preferences towards digital payments.
The other modes of electronic payments like NEFT, RTGS, IMPS, Mobile banking and Pre-paid Instruments have also shown increase like their other counterparts.
We tend to believe that any electronic platforms are used only for transferring money. However, there exist a host of non-financial transactions like
- Account balance enquiry using apps, Aadhaar, USSD
- Fetching of bills
- Mobile verification
- Mini-statement of account
- e-KYC verification
These transactions have also increased. Using of electronic platforms for non-financial transactions shows how much the people have adopted digital technology in their lives.
All of the above data sets show the increasing tide of Digital India. Digital technology has become normalized in Indian society. Despite concerns of less digital and financial literacy, trust issues and frauds, the people have overwhelmingly adopted electronic payment systems in their lives. It is a telling tale of how Modi government is making India ready to reap the fourth industrial revolution to become a five trillion-dollar economy.