State of Digital Payments in India

 It has been a while now since digital payments in India have become more mainstream. Although digital payment options were available to Indian consumers for a long time, the real growth happened after the demonetization in late 2016. PayTM jumped on the opportunity and benefited to a large extent as they already had the network, the infrastructure and marketing muscle to materialize the digital push. However, there were other players as well - MobiQuick wallet, PhonePe, GPay etc. 

Another great enabler was the Indian invention called UPI by NPCI - Unified Payments Interface. Although the UPI was launched before the demonetization (Apr 2016), it wasn't understood enough by the masses. I remember an incident when I had tried convincing my vegetable vendor to accept UPI payment instead of insisting on cash. He was absolutely unsure and reluctant. 

Fast Forward to 2022.

The UPI payments are ubiquitous. Every nook and corner accepts the UPI payments. In fact, a person like me who firmly believes in using credit cards wherever available has started spending money via UPI instead of CC. Lockdown, COVID pandemic and fear of spreading the virus via touch has forced almost every merchant to ride on the UPI bandwagon. Although the government has its own app - BHIM, the real enablers were the QR codes made available by several intermediaries like PayTM, PhonePe and GPay. The QR codes served two purposes - fetch the attention of the customer and ease of initiating the payment. Simply scan the QR code via your favourite app, enter the amount and UPI password and you are done. Within seconds the money is transferred from the customer to the merchant's bank account. 

The ingenious Indian mind found some crazy ways to cheat the merchants. Some folks stored the screenshot of the payment and showed it for repeat purchases. Increased UPI payments also led to some glitches in the system resulting in the loss to merchants. PayTM launched the "SoundBox" which solved both the problems. A busy merchant can simply pay attention to announcements coming via SoundBox for the payments made without worrying about the actual receipt of the money. 

A piece of recent news on UPI mentioned that it is now capable of handling 50,000 transactions per second. In Apr-2022, UPI handled about 550 Cr transactions worth INR 9.83 Lakh Crore. And this volume is showing significant growth m-o-m on a regular basis.

One of the interesting areas of UPI is “request money”. This has a huge potential for legitimate merchants to improve collections, but at the same time a malicious tool for fraudsters to rob innocent individuals. 

On a non-UPI side of the business, the RuPay network is making life miserable for the Goliaths of the credit world - MasterCard and Visa. RuPay is an Indian multinational financial services and payment service system, conceived and launched by the National Payments Corporation of India in early 2012. RuPay is going places with strong support from the Indian Government and robust implementation. I will cover this story at length at some other point in time.

Withdrawing from ATM has become so much rare that when I walked in to an ATM center during my recent trip to Goa for few seconds I was dumbstruck. I felt like I was operating some new machine! Except for the Goan cab drivers, everyone was happily accepting digital currency. 

From the illiteracy and lack of faith about the digital payments to primarily accepting digital payments, India has come a long way on this digital journey, but we are still far away from cashless economy IMO.