Since the world was put under lockdown due to the COVID-19 pandemic, people all around the world have become much more comfortable with digital solutions. India is not far behind with a projected $1 trillion in digital payments by 2026. Most recently, Unified Payments Interface (UPI) was launched for low-cost feature phones. The RBI hopes to draw at least 400 million individuals into the digital economy with this milestone step. People without smartphones will now be able to use UPI technology to send money.
The new wave of digitisation is bound to change many aspects of our living, especially for a developing nation like India. Even people with low digital literacy levels and proficiency in using novel ways of carrying out activities are dipping their toes into the pool of modernisation.
People’s payment habits, in particular, have evolved into a digitally-driven modus operandi. Cashless payments are at the top of everyone’s list since they combine convenience and security. Post pandemic, the cashless/digital mode of payment has become the preferred way of making payments.
Let’s quickly revisit some mainstream digital payment gateways launched by NPCI that have swiftly crawled into people’s daily lives and resulted in a robust digital payment ecosystem in India:
There’s no doubt that the Unified Payments Interface, or UPI, is the most widely used digital payment mechanism in the country. The launch of UPI123Pay by RBI to enable feature phones for digital transitions is another huge step forward.
AEPS or Aadhaar Enabled Payment System
AEPS is a bank-led payment model that allows Aadhaar number holders to make financial transactions using Aadhaar-based biometric authentication from their Aadhaar linked bank accounts. AePS processed 225 million transactions worth Rs 28,522 crore in March 2022 alone.
IMPS or Immediate Payment Services
IMPS is a mobile phone-based interbank electronic fund transfer service. IMPS can be accessed through various methods, including mobile banking, SMS, net banking, and even ATMs.
The National Highway Authority of India has an electronic toll collection system established in 2014. Toll payments are made immediately from a prepaid wallet or savings account linked to the FASTag via Radio Frequency Identification technology.
Launched by the RBI, RuPay facilitated India’s entry to the international payment market through these indeginous cards. As a way to create “less cash” economy, it called for 100% financial inclusion. With the Pradhan Mantri Jan Dhan Yojana plan, RuPay was able to reach rural India and promote digital payments. 31.67 million of such cards have been distributed by the banks in India till November 2021.
Is Digital Payments the Future of Money?
Digital payments are making their place in the market. As it is available at people’s fingertips swiftly, it is all set to become the most popular way of making payments and transactions in the future as well. These provide time and cost-saving opportunities not only for big businesses but also for local shop owners, small vendors, and the general population in their day-to-day mundane financial transactions.
Digital transformation has accelerated across all industries in the last few years, and finance is no exception. Even as society returns to normalcy, with restrictions lifted and offices reopened, the habits developed during the pandemic persist. Spending has changed both online and offline. Businesses that were previously solely operated as a brick-and-mortar model have adjusted as online shopping became the only viable alternative during the shutdown. The value placed on touchless payments in physical stores aided contactless payments’ continuous expansion. Digital advancement that would typically take years was compressed into just a few months.
How the FinTech Industry Contributed to the Rapid Financial Digitisation?
The FinTech industry, to a large extent, is in charge of encouraging cashless payments by supporting the use of UPI, Aadhaar and biometric authentication to make payments, transfer money and withdraw cash from the bank accounts without visiting the bank branches. With the adoption of UPI, a banking system, which is used to transfer money on digital payment apps, economic growth is being stimulated by the growing use of cashless payment systems as it makes digital payments easier, quicker, and more convenient.
FinTech is fast transforming the banking industry’s face, with some banks now adopting digital, paperless, and cashless processes. Several reasons have supported the growth and extension of India’s FinTech ecosystem, including the increasing availability of smartphones, improved internet access, and high-speed connectivity. FinTech’s expansion in India will be aided by an increased partnership with traditional banking, insurance, and retail sectors, where they are aggressively adapting to changing client needs.
Digital payments are backed with security and government intervention, leaving no scope for doubt and fraud. The FinTech industry, in collaboration with people’s trust and needs, is generating more and simpler ways of providing the usage of cashless payments in the marketplace.
It can be concluded that with unpredictability and uncertainty being expected, one thing is certain – the future of money is digital. Post pandemic, many developing trends are enabling financial digitisation, with the potential to unlock the power of digital money and further transform our payment environment and commerce in general.
Views expressed in this article are the personal opinion of Amit Nigam, Executive Director and COO, Bankit.