Digital Payments In India: Are We Ready?

With over a billion transactions last month, digital payments in India are booming.  Investment banking firm Credit Suisse predicts that the digital payments market will be worth USD 1 trillion in just under five years, led primarily by the growth in mobile payments.

Smartphones have become cheaper and easily available; India currently has close to 400 million mobile broadband users. Factor in the entry of Reliance Jio which reduced the prices of data plans across the board, and high-speed internet on-the-go is no longer a rare luxury.

As a consequence of Digital India, the infrastructure (both software and connectivity-wise) necessary for digital payments has been put in place. The team behind Aadhar cards developed India Stack, a set of code that developers can use to build applications which integrate the Aadhar database.

The Unified Payments Interface (UPI) code – also a part of the India Stack – was originally developed by the National Payments Corporation of India using open APIs, which means that anyone can integrate real-time mobile to mobile money transfers into their services. Google and Whatsapp are the latest entrants into a field that already features banks, private players and the government’s BHIM app itself.

Reach And Acceptance Are Obstacles To Widespread Digital Adoption

Cash is still India’s preferred mode of transaction. The currency in circulation is almost at the same levels it was before demonetization in 2016. This is partly because cash is easily understood; there is only one 500 rupee note, but a multitude of digital payment options. Besides, not all of them are inter-compatible.

Digital payments are dependent on access to the internet, something that is still out of reach for most of India. Over 700 million people have never heard of the internet, especially in rural areas. The country is ranked 109th in testing service Ookla’s ratings for mobile internet speed, and cellular network coverage is nowhere near ubiquitous as claimed.

Awareness is another issue. Digital payments in India are perceived as a tool for only the educated. Proper, soft skill training must be looked at for bank staff, who aren’t able to convert customers to m-wallets or address security concerns. A model that could be adopted to increase adoption in villages – where communities are often close-knit – is for banks to train the local postman in a quick ‘digital basics’ module that can be delivered wherever he goes.

While the government is working on ambitious infrastructure projects such as BharatNet to improve internet infrastructure, sociological acceptance could take longer to overturn. Only 29% of internet users in India are women, with restrictions on how long they can use phones for. We cannot call ourselves a digitally-powered nation until these issues are addressed.



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