essay on digital payment in india

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Digital Payment In India Essay – Know the types of digital payment platform & their benefits

The Indian Government initiated a flagship program named ‘Digital India’ with an objective to promote digital payments and it aspires to convert India into a digitally empowered society and knowledge economy. Recently, Ms. Nirmala Sitaraman made a statement in Budget 2022 to establish one digital payment system in 75 districts across the country. In this post we have talked about  digital payment in India essay  followed by the pros and cons of digital payments across the nation.

Table of Contents

Digital Payment In India Essay – Introduction

A digital payment, commonly known as an electronic payment, is an electronic transfer of funds from one account to another. As a result, no real money or instruments such as cash, cheques, or other similar things are exchanged. However, one should be aware that digital transaction does not only refer to online transactions; it also includes transactions processed in a physical location. This indicates that both the payer and the payee exchange currency via digital means. ATMs aren’t the only way to make digital payments, online banking and UPI are also options. RTGS, NEFT, and IMPS are examples of online banking. Nearly every single bank in India offers digital payment systems, allowing customers to pay and receive payments electronically in a timely manner.

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Essay On Digital Payment In India – Kinds of Digital Payments

Following the advent of Cashless India, India now has ten different digital payment options. Some approaches have been in use for over a decade, while others have only lately gained popularity. Let’s take a look at some of the most common digital payment platforms and see which one would be the best fit for you based on the features they provide.

Mobile Banking

Several banks offer mobile applications that can be downloaded from App stores. It allows customers to conduct various types of transactions using a smartphone from a distance. It enables customers to conduct various types of financial transactions using a smartphone or tablet from a distance. Mobile Banking is a terrific method to keep track of the bank accounts in today‘s world.

Micro ATM systems are used by thousands of Entrepreneurs to provide basic banking services. The said entrepreneurs utilizes a gadget that authenticates the fingerprint and allows the customer to transfer money from your Aadhar-linked bank account. Banks all around the country are linked to the Micro ATM devices. It allows a person to transfer or withdraw funds instantaneously to any bank.

Internet Banking

Customers can process transactions and other financial operations over a bank’s website using Internet Banking. It  enables customers to conduct all of their banking transactions online. Customers must first register for online banking with the bank where they have a Savings Account.

Mobile Wallet

A mobile wallet/digital wallet/ e-wallet is a sort of virtual wallet that allows a person to link the debit or credit card details to your mobile wallet software and transfer funds to the wallet online. Instead of physically utilizing cards, this app can be used to make transactions digitally. A customer must link their bank account to their mobile wallet in order to transfer money into it.

Bank Prepaid cards

These are plastic cards provided by banks that are pre-loaded with funds and can be used in the same way as a debit card. These are not linked to an account and must be charged with funds from your bank account, either online or in-person.

Unified Payment Interface (UPI)

It connects several bank accounts (from any partner bank) to a single mobile app, allowing for multiple banking functions, smooth fund routing, and merchant payments all under one roof. Transactions can be carried out 24*7*365 via UPIs.

AADHAAR Enabled Payment System (AePS)

The AePS was created to help accelerate financial inclusion in the country by leveraging the visibility and reputation of Aadhar. It allows banks to safely and securely route Aadhar-initiated interbank transfers via a central switching and clearance service.

Unstructured Supplementary Service Data (USSD)

The system is intended to promote financial inclusion and development in remote areas with limited internet access. The transfers are limited to Rs 5,000 for each transaction for security reasons.

Banking Cards

It encompasses all card kinds, including debit, credit, and prepaid cards. Visa, MasterCard, and RuPay are the most popular card payment methods in India. Banking cards have become one of the most popular payment methods due to the immense convenience, control, flexibility, and security they provide when compared to other options. 

Point of Sale (POS) Terminals

A POS is a location where sales are carried out. As a result, a POS can be anywhere. It’s readily available and has no transaction limits set by the RBI, making it a suitable and safe way to pay for things.

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 Importance Of Digital Payments In India 

• Digital payments are a speedy, friendly and safe mode of payments.
• Most of the digital payment wallets and other modes don’t charge anything as processing fee and thus it is economical for most of them.
• Users also get rewards and other benefits on certain digital transactions.
• Digital wallets help in maintaining the transaction records.
• With the help of digital payments, govt. can keep track of unappropriate transactions.

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Conclusion of Digital Payment In India Essay

Firstly due to demonetization and then because of COVID-19 and India’s push for cashless transactions, our reliance on cash has decreased significantly with the emergence of many digital payment options. These approaches are not only simple and friendly to use, but they also provide additional protection, cost savings, and adaptability.

Check the details about Digital Payment in India

Digital payment is an electronic transfer of funds from one account to another.

Read the above mentioned part in this post to read about the advantages of digital payment in india.

Currently, there are 10 kinds of digital payments in India. Please read above to know more about the types of digital payments.

Yes, digital payments are safe in India.

RBI governs all transactions related to digital payments.

By Skandh Gupta

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DIGITAL PAYMENTS AND THEIR IMPACT ON THE INDIAN ECONOMY

Recent case studies.

India has a huge potential for digital payments. As of October 2021, the country had around 1.18 billion mobile connections, 700 million Internet users, and about 600 million smartphones. These numbers are growing rapidly each quarter. With about 25.5 billion real-time payment transactions, India ranked first in the world in terms of the number of transactions in 2020.

In 1996, Industrial Credit and Investment Corporation of India (ICICI) introduced online banking services in India, by using electronic banking at its branches. Later in 1999, banks such as HDFC, IndusInd, and Citi launched online banking facilities. The trend continued to grow with increasingly more banks launching net banking services in India. This marked the beginning of the digital transactions era in India – several new banks started offering services to users.

In 2008, the National Payments Corporation of India (NPCI) started its journey. It was formed by the Reserve Bank of India (RBI) and Indian Banks’ Association (IBA) in order to create a robust payment and settlement infrastructure in India. Since then, it has launched several products such as Aadhaar Enabled Payments System, Bharat Bill Payments System (BBPS), BHIM, and Cheque Transaction System.

• Banking Card – This was launched by the Central Bank of India in India in 1980, in the form of the first credit card. MasterCard was introduced in 1988, and until 1993, several PSU banks started issuing credit cards.
• Unstructured Supplementary Service Data (USSD) – The USSD functionality was launched in 2016. This is a mobile banking facility enabling users to use mobile banking without smartphones or an Internet connection.
• Aadhaar Enabled Payment Systems (AEPS) – This is a bank-led model which allows online interoperable financial inclusion transactions at point-of-sale (PoS) through the business correspondent of any bank using the Aadhaar authentication.
• Unified Payments Interface (UPI) – UPI was developed by NPCI in 2016; it facilitates peer-to-peer, person-to-merchant transactions.
• Mobile Wallet – This is a virtual wallet that stores payment card information on a mobile device.
• Bank Pre-Paid Card – Under the motto “Pay Now, Use Later,” the pre-paid cards allow users to buy things with funds available in their cards.
• Point of Sale – Point of Sale (PoS) is a technological instrument provided by a Merchant Establishment (ME) to carry out the sale of goods or services to customers in a cashless environment.
• Internet Banking – This is an online banking method that enables customers of a bank or financial institution to carry out transactions through a portal.
• Mobile Banking – This is a service provided by banks and financial institutions to carry out financial transactions through a mobile device.
• Micro ATM – These are portable devices allowing banking transactions through card swipe machines.

In order to transform India into a digitally empowered society and knowledge economy, the Government of India launched Digital India programme in 2015. The programme focuses on three main vision areas: digital infrastructure as a core utility to every citizen, governance and services on demand, and digital empowerment of citizens. Through the programme, the government wants to ensure the availability of high-speed Internet, provide mobile phones and bank accounts to every citizen, ensure availability of services in real-time from online and mobile platforms, make financial transactions electronic and cashless, and ensure digital literacy and availability of digital resources across the country.

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Cashless Economy: The Role Of Digital Payments In India

India’s digital landscape has experienced massive growth since 2020. The reduced costs of data access and affordable smartphones have played a significant role in internet penetration within urban and rural populations. By 2030, it is projected that  one billion consumers  in India   will have access to the Internet. Around 839 million Indians will become regular smartphone users and by 2026, Indian households will make over 50% non-cash transactions. As more consumers engage and transact digitally, both consumers and businesses will increasingly become part of the cashless economy. 

These projections present a massive opportunity for businesses in eCommerce, retail, hospitality, and other sectors. They will now be able to reach newer demographics, accept digital payments, and grow their business digitally.

In this blog, we delve into India’s shift to a cashless economy, its future impact, and the potential for businesses to leverage this vast opportunity to accelerate growth. 

What is a cashless economy? 

A cashless economy is, essentially, an economy that has transitioned from one where transactions primarily happen in cash to completely facilitate digital payments across industries, entities, and business and consumer segments. 

India’s journey to becoming a cashless economy was expedited with the introduction of the Unified Payments Interface (UPI) system in 2016. The arrival of UPI enabled consumers and businesses to make payments and facilitate money transfers instantly and securely in a cost-effective manner. 

Consumers and businesses are now shifting to digital payments for several reasons, as follows:

It has become a necessity 

Worldwide lockdowns and disruption of the supply chains during the pandemic of 2020 made it necessary for consumers to shop online and make digital payments. 

While for many, this transition started out as a need, through this experience, they were able to discover the various benefits of digital payments and become digital-first consumers. 

Larger market access with a cashless economy

Online shopping opens up access to a whole new variety of products and services which consumers are unable to find in the neighbourhood. They can reap the benefits of discovering discounts, offers, rewards, miles, and other benefits through digital payments. 

Multiple payment modes 

Consumers do not need to make multiple trips to the bank to remove cash. They can, instead, leverage multiple digital payment modes at their convenience.

Advances in technology enable businesses to simplify the shopping process by introducing tools like QR codes and payment modes such as UPI, net banking, debit cards, and credit cards.

They can also access features such as Buy Now, Pay Later, and Equated Monthly Installments (EMIs), thus unlocking easy credit options in their shopping journey.  

No need for a digital footprint 

Businesses no longer need to have a website or app to facilitate shopping. They can serve a unique payment link directly to customers on the channel of their choice, from social media platforms to messaging apps and email, and collect payments instantly and securely.  

Key challenges with digital payments in a cashless economy

While such innovations exist, not all businesses have made the transition to a cashless economy. However, consumer expectations continue to rise, and those businesses which cannot keep pace with digital payments stand to will lose market share. 

For instance, consumers today are more likely to buy a product or service from a company, which enables them to leverage the payment mode they are most comfortable with. Credit card holders, for instance, are resistant to going back to net banking.

On the other hand, users of wallets may not prefer debit cards. Customers tend to get comfortable with one or two modes and stick to these options. 

Today, consumers are also engaging in multiple channels, such as social media, social messaging apps, and chatbots. However, many businesses are not equipped to turn these channels into point-of-sales.

Even though the technology is available, they are yet to put it in place for their business. In the process, they lose out on market share by not capitalizing on these customer touchpoints. 

How to facilitate secure, versatile digital payments 

Facilitating seamless payment experiences is one of the most important stages of the entire consumer workflow designed by businesses. Today, companies can integrate a payment gateway, a user-friendly network which facilitates smooth digital payments between customers and businesses.

A superior, innovative payment gateway must come with the following features: 

• It must offer the highest level of payment security and reduced potential for any data breaches 
• It must facilitate multiple payment modes such as credit cards, debit cards, UPI, mobile wallets, and net banking. 
• The UPI autopay feature , in alignment with Reserve Bank of India (RBI) guidelines, enables recurring payments, which is especially relevant for any subscription business. 
• A superior payment gateway must be able to offer customers options such as Buy Now, Pay Later, and popular credit options.
• It must offer affordability options such as Equated Monthly Installments (EMIs), along with an EMI calculator, as well as the “No credit” option.  
• Companies with no website or app can generate a unique, one-time payment link to facilitate payments via messaging apps and social media. This feature is also useful for customers who prefer to shop within their channel of choice rather than visit an app or website. 
• Businesses must be able to generate custom branded pages, which usually inspire higher trust in consumers. 

To conclude 

No matter how good a company’s services or products are, in a cashless economy, customers will always prioritize a high-quality, digital user experience. The payment experience will play a major role in helping companies convert traffic into sales and reduce cart abandonment numbers.

Those companies investing in a contemporary payment gateway, which factors all consumer needs, can pave the way to enter the cashless economy and build a competitive advantage. 

At Plural by Pine Labs, we provide a comprehensive online payment gateway, which comes with a wide range of features such as multiple payment modes, UPI autopay, Buy Now Pay Later, the EMI feature, and custom branded pages. 

Plural also enables the  easy creation of Plural links , which facilitate seamless payment via SMS, messaging apps, and social media. Today, a network of over 150 Croma stores across 40 plus cities  accept cashless payments via this innovation. Croma witnessed an average of 188% quarter-on-quarter growth rate for pay-by-link.

Plural’s Affordability Suite, offered both online and offline, has also triggered growth, with over 70% of Croma’s transactions now being routed through Plural’s gateway using EMIs. Plural Links can be shared via WhatsApp, SMS, email, Instagram, and other social media platforms. 

To learn more about Plural Gateway, contact us. 

Plural by Pine Labs has received an in-principle authorization from the Reserve Bank of India (RBI) to operate as a Payment Aggregator. 

Amrita Konaiagari is a Marketing Manager at Plural by Pine Labs and Editor of the Plural blog. She has over 10 years of marketing experience across Media & Tech industries and holds a Master’s degree in Communication and Journalism. She has a passion for home décor and is most definitely a dog person.

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Digital Payments In India – Meaning, Types of Digital Payment, Benefits & How do they Work?

Table of Contents

What is Digital Payment?

Digital payments are transactions that occur via digital or online modes. This means both the payer and the payee use electronic mediums to exchange money.

The meaning of digital payment is equivalent to an electronic payment. Digital payments use a digital device or platform to move money between payment accounts. They can be partially, primarily, or fully digital.

Digital payments can take place through the Internet as well as on physical premises. Some examples of digital payments include buying something from e-commerce platforms and paying for it via UPI ( unified payments interface ) qualifies as a digital payment. Similarly, if you purchase something from your local grocery store and choose to pay via any other payment method , that also is a digital payment. 

Digital Payment Examples

Mobile payment apps.

Apple Pay, Google Pay, Paypal and Samsung Pay

Digital cards

Contactless payments, bank transfers, biometric payments, national electronic toll collection (netc) fastag, types of digital payments in india, 1. banking cards.

Indians widely use banking cards, debit/credit cards, or prepaid cards as an alternative to cash payments . In 1981, the Andhra Bank launched the first credit card in India.

Cards are preferred because of multiple reasons, including, but not limited to, convenience, portability, safety, and security. This is the only mode of digital payment that is popular in online and physical transactions. Many apps are being launched to manage card transactions, like Cred, Square, etc.

2. Unstructured Supplementary Service Data(USSD)

The unstructured supplementary service data (USSD) was launched for those sections of India’s population which do not have access to proper banking and internet facilities. Under the USSD, mobile banking transactions are possible without an internet connection by dialling *99# on any essential feature phone.

This number is operational across all telecom service providers (TSPs) and allows customers to avail of services, including interbank account-to-account fund transfer, balance enquiry, and availing of mini statements. Around 51 leading banks in India offer USSD service in 12 languages, including Hindi and English.

3. Aadhaar Enabled Payment System (AEPS)

The Aadhaar Enabled Payment System (AEPS) is a bank-led model for digital payments initiated to leverage the presence and reach of Aadhar. Under this system, customers can use their Aadhaar-linked accounts to transfer money between two Aadhaar-linked bank accounts. According to data from the National Payments Corporation of India (NPCI), the AEPS had crossed transactions over 205 million till February 2020.

The AEPS does not require physical activity like visiting a branch, using debit or credit cards or signing a document. This bank-led model allows digital payments at PoS (point of sale / micro ATM) via a business correspondent, known as Bank Mitra, using Aadhaar authentication. The AePS fees for cash withdrawal at Business Correspondent poin ts are around ₹15.

4. Unified Payments Interface (UPI)

The UPI is a payment system that culminates numerous bank accounts into a single application, allowing money transfers between parties. Compared to NEFT  (national electronic funds transfer), RTGS (real-time gross settlement), and IMPS (immediate payment service), the UPI is considered a well-defined and standardised process across banks. You can use UPI to initiate a bank transfer anywhere in just a few clicks.

The benefit of using UPI is that it allows you to pay directly from your bank account without the need to type in the card or bank details. This method has become one of the most popular digital payment modes in 2020, with October witnessing over 2 billion transactions. 

Related Read: What is the Difference Between IMPS and NEFT Fund Transfer?

5. Mobile Wallets

Mobile wallets are a type of wallet where you can carry cash in a digital format. Often, customers link their bank accounts or banking cards to their wallets to facilitate secure digital transactions. Another way to use wallets is to add money to the mobile wallet and use the balance to transfer money. You can also check out the digital wallets guide , for necessary details and clarify confusions, if any.

Some popularly used ones include Paytm, Freecharge, Mobikwik, mRupee, Vodafone M-Pesa, Airtel Money, Jio Money, SBI Buddy, Vodafone M-Pesa, Axis Bank Lime, ICICI Pockets, etc.

Related Read: What is the PhonePe transaction limit for 2024?

6. Bank Prepaid Cards

A bank prepaid card is a pre-loaded debit card issued by a bank, usually meant for single use or can be reloaded for multiple uses. It is different from a standard debit card because the latter is always linked to your bank account and can be used numerous times. This may or may not apply to a prepaid bank card.

Customers can create a prepaid card with an account that complies with Know Your Customer (KYC) norms. Corporate gifts, reward cards, or single-use cards for gifting purposes are the most common examples of these cards.

7. PoS Terminals

The PoS is the location or segment of a sale. These terminals were considered checkout counters in malls and stores where payments were made for a long time. The most common type of PoS machine is for debit and credit cards, where customers can make payments by simply swiping the card and entering the PIN (personal identification number).

With digitisation and the increasing popularity of other online payment methods, new PoS methods have emerged. First is the contactless reader of a PoS machine, which can debit any amount up to ₹2000 by auto-authenticating it without needing a PIN.

Related Read: What is the Point-of-Sale (POS) limit For Debit Cards?

8. Internet Banking

Internet Banking, also known as e-banking or online banking, allows the customers of a particular bank to make transactions and conduct other financial activities via the bank’s website. It requires a steady internet connection to make or receive payments and access a bank’s website called Internet banking.

Today, most Indian banks have launched their Internet banking services. It has become one of the most popular means of online transactions. Every payment gateway in India has a virtual banking option available. Some of the top ways to transact via Internet banking include NEFT, RTGS, and IMPS.

9. Mobile Banking

Mobile banking refers to conducting transactions and other activities via mobile devices, typically through the bank’s mobile application (app). Today, most banks have mobile banking apps that can be used on handheld devices like mobile phones and tablets and sometimes on computers.

Mobile banking is known as the future of banking, thanks to its ease, convenience, and speed. Digital payment methods, such as IMPS, NEFT, RTGS , and other services like investments, bank statements, bill payments, etc., are available on a single platform through mobile banking apps. Banks encourage you to operate digitally as it makes processes easier for them.

10. Micro ATMs

A micro ATM is a BC device to deliver essential banking services. These correspondents, who could be local store owners, will serve as a  ‘micro ATM’ to conduct instant transactions. They will use a device that will let you transfer money via your Aadhaar-linked bank account by merely authenticating your fingerprint.

Essentially, the BC will serve as a bank. You need to verify your authenticity using UID (Aadhaar). The essential services that micro ATMs will support are withdrawal, deposit, money transfer, and balance enquiry. The only requirement for Micro ATMs is to link your bank account to Aadhaar.

  Related Read: What are the Different Types of Digital Wallets?

How Does Digital Payment Work?

Have you ever wondered how digital payments really work? Let’s simplify it for you in this section.

1. The Parties Involved

In digital payments, simplicity on the surface masks a complex network of intermediaries, ensuring smooth and successful transactions. Key players in digital payment systems include the merchant (payee) and the consumer (payer), whose interactions initiate the digital payment process. Both parties require a bank account and online banking to engage in digital transactions.

Additionally, other key players include the bank and the payment network, which facilitate secure fund transfers.

2. Bank Accounts

For digital payments, merchants and consumers participate as customers, so they need to have bank accounts with online banking features. Bank accounts build up the foundation of conducting e-transactions by storing funds securely and endorsing transfers.

3. Step-by-step Transaction

• The consumer starts payment transactions using UPI, mobile wallets or a similar option of his choice.
• The payment details are transmitted securely into the payment network.
• The payment network checks for the balance, thereafter, funds are moved from the consumer’s bank account to the payee’s bank account.
• A confirmation is sent to both the buyer and seller to confirm that the transaction has been completed.

4. Payment Rail

Payment rails serve as the backbone infrastructure that enables the transfer of funds between banks. They function as the pathways through which transactions move, linking institutions and guaranteeing the smooth flow of funds. Payment rails exist in many formats, such as automated clearing house (ACH), card networks and real-time payment systems, each designed for transaction types and processing speeds.

Related Read: What is Stop Payment and How Does it Work?

Benefits of Digital Payments

Some of the key advantages of digital payment in India that have made them a preferred choice for transactions are:

1. Faster Payments

  Digital payments allow immediate transactions that can be processed immediately, reducing the waiting time that one has to go through with traditional payment methods. This makes transactions seem smooth and efficient.

2. Convenience in the Payment Procedure

Digital payments enable swift and hassle-free transactions from your devices, eliminating the need for physical presence or documents. Whether you’re paying bills, shopping online, or transferring funds, digital payment methods offer a user-friendly experience that saves both time and effort.

3. Better Payment Security

Digital payment systems use encryption and system authentication protocols, which minimise the risk of unauthorised access and effectively prevent fraud. Your financial information is protected, keeping you stress-free throughout the entire process of making digital payments.

4. Improved Efficiency

Automation and digitisation in payment processes have significantly enhanced operational efficiency. By minimising manual intervention, errors are reduced, and financial workflows are streamlined, resulting in a more efficient and error-free system.

Digital Record of Transactions: Digital payments provide a traceable account of transactions, thereby guaranteeing safety. Such efficiency and credibility allow individuals and businesses to maintain accurate financial records. It is easy to monitor the payment history and can be referred to when required.

5. Reduced Costs

The digital payment framework eliminates the requirement of physical infrastructure, paperwork, and manual handling. This reduces the cost of transactions for business enterprises and financial institutions. Also, digital transactions usually include a lower cost of transfer as compared to traditional banking methods.

6. Ease of Use

The payment systems facilitate customer comfort. The old cash-processing machines that could only recognise clear notes and coins are being replaced by ATMs, which are accessible and easy to use. Digital payment systems are easy to operate and will not take additional effort to understand how they work.

7. Low Fees

Digital payment methods typically entail lower transaction fees compared to banking methods, contributing to overall cost efficiency.

8. Boost Revenue

Merchants can benefit from a wider consumer base and better cash flow by utilising digital payment methods, leading to higher revenue. Digital payments offer an efficient system, leading to higher customer satisfaction and smoother transactions, which can attract more customers in the future.

9. Discounts and Savings

Many online platforms provide discounts, cashback, or loyalty programmes. These discounts motivate the customers to go for the digital payment option, which saves them money and provides several benefits.

10. Low Risk of Theft

Digital payments diminish the possibility of the actual loss of money since it’s not physical. Transactions occur in the digital world, therefore rendering the necessity of holding large amounts of currency physically unnecessary. This safeguards payments by preventing direct cash transactions and ensuring their protection.

11. Customer Management

Digital payment systems can frequently oversee and monitor the customers’ transactions, preferences, and feedback, which gives the business more control over these aspects. This improves overall customer management by adjusting service offerings based on customer behaviour.

12. Better Customer Experience

The ease and convenience offered by digital payments enable customers to enjoy superior service, thereby enhancing their experience. Simplified payment processes result in increased customer satisfaction and a greater likelihood of future collaboration with the business.

13. Efficient Record-Keeping Features

Through the digital infrastructure, digital payments for offline businesses are recorded efficiently; thus, the business environment is friendlier than before. Today businesses and individuals can easily track, control, and analyse their financial activities to obtain financial transparency and improve the financial management process.

Razorpay Payment Gateway: Your Digital Payment Partner

Razorpay is India’s first full-stack financial solutions provider and aims to enable all businesses, enterprises, entrepreneurs, and freelancers to adopt digital payment methods to grow their businesses. Razorpay Payment Gateway is the flagship product, providing holistic payment solutions to both big and small enterprises with the lowest payment gateway charges in the market. If your venture has a website or an app, then Razorpay Payment Gateway should be your go-to option. Some of the key features and benefits include:

• Accept all Payment Modes : Multiple options include domestic and international credit & debit cards, EMIs (equated monthly instalments), PayLater, net banking, UPI, and mobile wallets.
• Flash Checkout : Thanks to the option of saving cards, there is no need to type in the card details every time – saving time and increasing sales.
• Powerful Razorpay Dashboard : The dashboard provides efficient monitoring through reports, detailed statistics on refunds and settlements, and much more.
• Protected and Secured : The PCI DSS Level 1 compliance, with frequent third-party audits, and a dedicated internal security team ensures the safety of your data.
• Run Offers Easily : The Razorpay dashboard allows you to run every promotional offer at the click of a button.

Read More: What is Payment Gateway and How Does It Work?

More From the Razorpay Payment Suite

1. razorpay payment links.

Payment Links are one of the easiest ways to accept payments online. You can generate a link from the Razorpay dashboard or ePOS app and share it with your clients. By clicking the link, your customer can pay within minutes.

Razorpay payment links ensure safe money movement with100% secure ecosystem guarded with PCI DSS compliance. These are extremely simple to generate and require no prior coding or design knowledge. It offers more than 100 payment options to a customer, ensuring timely and accurate payment. 

2. Razorpay Payment Button

Since most businesses already have an online presence, we developed a product to integrate digital payments on an existing website. The Razorpay payment button allows you to accept payments on any website or webpage by adding a code line. Within five minutes, a customised code will be embedded on your website to start accepting payments.

Some of the key uses of a payment button:

• Add an integrated checkout on your website
• Start accepting fees without any integration or coding efforts
• Use one of the existing templates or create one of your own

3. Razorpay Payment Pages

For people who want to give information and receive payments simultaneously, Razorpay is a better alternative. With Razorpay Payment Pages , you can set up your venture’s mini-website in less than five minutes. Payment pages allow you to add your business information, showcase pictures, and accept payments – all in one. With our ready-to-use templates, you can accept payments for multiple payment modes.

4. Razorpay Subscriptions

Razorpay Subscriptions is a means to collect recurring payments without troubling the customer to intervene at each payment. This means that professionals can obtain a steady flow of fee payments without worrying about operational barriers. It ensures complete visibility and flexibility, and the customer can control his regular payments.

With the rise of digital payments, recurring payments via cards are becoming less popular. Thus, Razorpay subscriptions also bring with them the valuable features of UPI AutoPay . Under this feature, customers can set up recurring payments within minutes via their UPI app. 

Join India’s Journey Towards Digital Payments

The digital payment wave in India is not going anywhere. With financial literacy and accessibility on everyone’s mind, online payments will grow exponentially. As a business and a professional, this is the right time to onboard the digital payment wagon and enable your customers to transact online securely.

Frequently Asked Questions (FAQs)

1. do digital payments make you responsible.

Yes, digital payments make you responsible as a business owner or individual. When you choose to accept digital payments, you must ensure the security and integrity of the transactions. This includes protecting customer data, implementing secure payment gateways, and staying updated with the latest security measures to prevent fraud or data breaches.

2. Will digital payments replace all cash?

Despite the rise in popularity of digital payment in India, it seems unlikely that physical currency will be entirely phased out soon. Cash still holds significance in various instances and for low-value transactions.

3. Is electronic payment safe to use?

With advancements in digital payment technology, demographic shifts, and the evolving cyber-security landscape, online transactions are more popular and secure than ever.

4. Which digital payment methods are commonly used in India?

In India, popular digital payment options include UPI wallets such as Paytm and PhonePe, internet banking services, debit/credit cards, and AEPS. 

5. How has the government contributed to the growth of digital payments in India?

The Indian government has played a role in promoting payments through initiatives like demonetisation. This initiative aimed to reduce cash-based transactions while encouraging the adoption of electronic payment methods. The introduction of UPI by the NPCI has transformed how people conduct transactions.

6. What is the regulatory framework for digital payments in India?

Digital payment regulation in India is primarily overseen by the Reserve Bank of India (RBI). The RBI establishes rules and standards to ensure payment systems’ security, reliability and effectiveness. 

7. Can you provide examples of successful digital payment implementations in India?

Some notable digital payment initiatives in India include the BHIM app, which facilitates UPI-based transactions. Additionally, integrating Aadhaar with payment platforms has simplified authentication processes for individuals.

8. What are the future trends and innovations expected in the digital payments landscape in India?

Digital payments across India may involve adopting contactless payments, expanding UPI for transactions, integrating voice-activated payments, and emerging blockchain-driven payment solutions.

Shubhangi is a Content Marketer at Razorpay. A marketing enthusiast, she loves writing about business strategy and technology. You will often find her reading Indian mythology, exploring Delhi streets and taking Buzzfeed quizzes.

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Digital Payments driving the growth of Digital Economy

The demonetization policy in India had a significant impact on the country’s economy, but it also accelerated the growth of digital payments in India. Prior to demonetization, digital payments accounted for only about 10% of all transactions in India, but that number has grown to over 20% in the years since[1]. On November 8th, 2016, the Prime Minister of India, Sh. Narendra Modi, announced that all 500- and 1,000-rupee notes, which accounted for 86% [2] of the cash in circulation, would be demonetized. This strategic movement actually led to aggressive promotion and adoption of digital ecosystem in India.

The growth of digital ecosystem in India has been driven by a number of factors, including the government’s push towards digitalization, an increase in internet and smartphone penetration, and the rise of e-commerce. The Indian government has been actively promoting the use of digital technologies through various initiatives such as Digital India, Make in India, and Startup India. These initiatives aim to increase the use of digital technologies in various sectors such as healthcare, education, and agriculture, and also to create a conducive environment for start-ups to flourish. The increase in internet and smartphone penetration in India has also played a major role in the growth of the digital ecosystem. According to a report by the Internet and Mobile Association of India, the number of internet users in India is expected to reach 800 million by 2023. This increase in internet users has also led to an increase in the number of mobile wallet users in India, which is expected to reach 900 million by 2025[3].

With government’s mission to target 2,500 crore digital transactions in 2017-18 Union Budget through UPI, USSD, Aadhar Pay, IMPS and debit cards for promoting digital payment transactions in the country, this has been a significant step towards the government’s goal of increasing the use of digital payments and reducing the dependence on cash transactions. Digital payments have become increasingly important in India in recent years, as the country has seen a rapid increase in the adoption of smartphones and internet access. This has led to a significant increase in the use of digital payment methods, such as mobile wallets, UPI, and card payments. However, there is still a large proportion of the population that relies on cash transactions, and the government is looking to change this by promoting the use of digital payments. This will be used for a variety of initiatives to promote digital payments. One of the key initiatives will be to provide incentives for merchants to adopt digital payment methods. This may include subsidies for merchants to purchase point-of-sale terminals, as well as tax incentives for businesses that adopt digital payment methods.

The government’s contribution for digital payment transactions is a significant step towards achieving the goal of a cashless society. This allocation will help to increase the number of people who use digital payment methods, which will in turn help to reduce the dependence on cash transactions. Additionally, the government’s initiatives to provide incentives for merchants and to build infrastructure to support digital payments will help to create a more conducive environment for digital payments to thrive. This move will also help to increase the overall financial inclusion in the country and will bring more people under the ambit of formal banking and financial services. With the increasing adoption of smartphones and internet access, digital payments are becoming more accessible to more people. This allocation will help to further increase the use of digital payments and reduce the dependence on cash transactions, which will help to create a more efficient and secure financial system for all Indians

The digital payments ecosystem in India has also grown significantly in recent years, driven by a combination of government initiatives, an increase in internet and smartphone usage, and the rise of e-commerce. One of the key initiatives is the launch of the Unified Payments Interface (UPI) , which allows for real-time inter-bank transactions, and the Bharat Interface for Money (BHIM) app , which simplifies the process of making digital transactions.

UPI (Unified Payments Interface) has seen significant growth in India since its launch in 2016 by National Payments Corporation of India (NPCI). Here are some highlights of the UPI journey in India with YoY (Year-on-Year) growth statistics till Jan 2023[4]:

• In 2017, UPI recorded a YoY growth of 900%, processing over 100 million transactions worth INR 67 billion.
• In 2018, the YoY growth was 246% with transactions worth over INR 1.5 trillion processed.
• In 2019, the YoY growth was 67% with transactions worth over INR 2.9 trillion processed.
• In 2020, UPI recorded an YoY growth of 63% with transactions worth over INR 4.3 trillion processed in December 2020.
• In 2021, the YoY growth was 72% with over 1.49 billion transactions worth INR 5.6 trillion processed in June 2021[5].
• At the end of the calendar year 2022, UPI’s total transaction value stood at INR 125.95 trillion, up 1.75 X year-on-year (YoY), as per the NPCI. Interestingly, the total UPI transaction value accounted for nearly 86% of India’s GDP in FY22[8].
• At the end of the calendar year 2023, UPI’s total transaction volume stands on 83.75 Billion.

These statistics showcase the increasing popularity and adoption of UPI as a convenient and secure platform for digital transactions in India.

The increase in internet and smartphone penetration in India has also played a major role in the growth of the digital payments ecosystem. E-commerce has also been a major driver of the growth of the digital payments ecosystem in India. The e-commerce market in India is expected to grow at a CAGR of 31% and reach $200 billion by 2026[6]. The growth of the e-commerce market has led to an increase in the number of online shoppers in India, which is expected to reach 220 million by 2025. The digital payments ecosystem in India is also supported by a number of other private players as well. These players offer a range of digital payment services such as mobile wallets, UPI payments, and QR code-based payments.

With the aggressive stakeholder consultation with Ministry of Finance and Reserve Bank of India, it was envisaged that there are 16 different digital payment modes which are as follows:

Another major achievement of the DigiDhan Mission has been the creation of a digital infrastructure for financial transactions. The government has implemented a number of measures to promote the use of digital payments, including the launch of the Aadhaar-enabled

The DigiDhan Mission has also aimed to increase the number of digital transactions in India. The government has set a target of 25 billion digital transactions by March 2018, which was exceeded with 40 billion digital transactions. The government has also launched several initiatives to promote the use of digital payments in rural areas, including the launch of the Common Service Centers (CSCs), which provide digital services to citizens in rural areas.

DigiDhan Dashboard Application is a platform created by the National Informatics Centre, Ministry of Electronics & Information Technology, Govt. of India to track and monitor the usage of digital payments in the country. The dashboard provides real-time data on the number and value of digital transactions, as well as information on the types of transactions and the platforms being used. Some of its features include:

• Real-time data on digital transactions: The dashboard shows the number and value of digital transactions taking place in the country, broken down by different types of transactions (such as UPI, debit card, credit card, etc.).
• Information on the platforms being used: The dashboard provides data on the various platforms being used for digital transactions, such as BHIM, UPI, and various e-wallets.
• State-wise data: The dashboard shows the number and value of digital transactions taking place in different states of India, allowing users to see the level of digital penetration in different regions.
• Transaction History: The dashboard also provides transaction history of individual users, allowing them to view their past transactions.
• Reports: The Dashboard also provides different types of reports such as transaction, merchants, and user reports.

In conclusion, the digital payments ecosystem in India has grown significantly in recent years, driven by government initiatives, an increase in internet and smartphone penetration, and the rise of e-commerce. The digital payment ecosystem is supported by private players who offer a range of digital payment services. The future of digital payments in India looks bright with the expected growth in the number of internet users and e-commerce market size.

Year on Year growth for Digital Payments in India has been significant and can be referred below:

Digital Payment Dashboard has been integrated with Integrated with 118 public sector, private sector, payments, regional rural and foreign banks. In FY 2021-22, 8,840 Crores Digital Payment Transactions were achieved with 87.20% Current & Savings Accounts seeded with Aadhaar Number, 81.05% Current & Savings Accounts seeded with Mobile Number[7] .

• https://timesofindia.indiatimes.com/business/india-business/cash-still-king-as-digital-payments-inch-up-slowly/articleshow/61554102.cms
• https://www.bbc.com/news/world-asia-india-37974423
• https://www.livemint.com/news/india-to-have-around-900-million-internet-users-by-2025-report-11659063114684.html
• https://www.npci.org.in/what-we-do/upi/product-statistics
• https://www.npci.org.in/what-we-do/upi/product-statistics,https://m.rbi.org.in/scripts/AnnualReportPublications.aspx?Id=1351
• https://economictimes.indiatimes.com/tech/technology/indias-e-commerce-market-size-to-reach-120-billion-by-2026-report/articleshow/92740817.cms?from=mdr
• https://digipay.gov.in/
• https://inc42.com/features/record-breaking-numbers-upi-2022-hint-india-maturing-digital-payments-ecosystem/#:~:text=their%20total%20value.-,At%20the%20end%20of%20the%20calendar%20year%202022%2C%20UPI’s%20total,of%20India’s%20GDP%20in%20FY22.

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• Cashless India Essay

An Introduction to Cashless India

A cashless India is the first step towards making the dream of digital India a reality. In this cashless India essay, we will be talking about the meaning of ‘cashless’, the different alternatives for our monetary system, and the disadvantages and advantages of a country going fully cashless and digital in its economy. The following cashless India essay in English is for students studying in class 5 and above. The language here has been kept simple for a better understanding of young students. This essay on the cashless economy in India would enable young students to write an essay on the cashless economy in India on their own. 

As we know that cashless India is the new India and with the decision made by our honourable prime minister to demonetize money used previously, this concept of going cashless has become very popular. Although there are some disadvantages of going cashless, along with that there are more benefits as well. In this essay, you will know about everything that will help you to get better information about the concept of India going cashless. 

Essay on Cashless India

On the evening of November 8, 2016, at 8 P.M., Narendra Modi, the Prime Minister of India announced the demonetization of 500 and 1000 rupees notes in India. That historic decision had many reasons. One of the reasons was laying the stepping stone towards the dream of a cashless India.

The traditional form of monetary transactions happens with the exchange of physical hard cash between people. Cashless India is going to make it almost redundant. This idea has got a huge amount of push due to the ongoing COVID-19 pandemic, given the concerns with the exchange of physical cash. There are a lot of advantages to going cashless. Remember that everything has a positive as well as a negative aspect. It is not that there won't be any disadvantages of going cashless but the thing is that you tend to find the ways by which you can prevent these disadvantages from harming you. All that you need to do is be more careful. As we all know, prevention is always better than cure.

First of all, let’s understand the meaning of a cashless economy. A cashless economy is one in which the liquid transactions through the system happen with the exchange of plastic currency or through digital currency. ATM debit and credit cards are plastic currency and online payments come under digital currency. The advent of blockchain technology has redefined the meaning of a cashless economy through bitcoins. A decentralized system of finance is defined by the concept of bitcoins, but we are not focusing on that in this particular essay on cashless India. We are more focused to discuss why India needs to go cashless and what are the benefits that will come with India taking on this new change. This essay provides you with information on the advantages and disadvantages of the digital payment system also. It is not that you are not going to face any problem in online transactions, you must have heard that a coin has two sides and just like that, this topic of cashless India also has both pros and cons. Let’s move on to the pros and cons of a digital payment system.

We can see the Three Main Advantages of Cashless India.

Reduction of Black Money

Black money is the money that is earned but not accounted for in taxes. That money is hidden by people from paying taxes. This black money is an illegal instrument in an economy that is capable of reducing a government down to bankruptcy. The cashless economy will ensure there’s no black money since unlike hard cash digital money cannot be hidden. At least there is no way yet that could make the hiding possible. Digital money enables governments to track all transactions in an economy that helps keep the income authentic and transparent. The technology behind the digital economy has to be well updated and sturdy though.

Transparency

India has corruption inbred in its system starting from the ministerial level to the watchman level. And it exists due to the lack of transparency in our monetary system. In an economy that is as big as India, transparency is a huge issue. We have learned of scandals like the CWG or 2g scams or the Rafale Jet scams over the years, and these scams are a result of the lack of transparency in transactions. It’s a shame that a small cashless economy in India essay would never do justice to the topic since it will never be enough to write about all of the corruption scandals India has had since its independence. Corruptions of this scale could be brought down to a large extent if we could achieve that dream of a cashless economy throughout. And it's possible because the origin and endpoint of a transaction could easily be tracked in a cashless economy and that’s the biggest advantage.

There are Two Major Disadvantages of Cashless India.

Online Theft

With the improving technology every day, there’s a rampant increase in online cheating and fraud episodes. If the government is unable to achieve sturdy and not-possible-to-hack digital systems, in a country like India with a 135 crore population, it is completely impossible to make the economy cashless. People are still afraid of making big transactions online after watching the reports of online thefts on national news channels.

Infrastructure, or the Lack of it

Not just the government infrastructure, it requires infrastructure on an individual level too. A gadget or a smartphone, data connectivity, and electricity for charging the phones regularly are the basic requirements for making online transactions possible. These are privileges that exist mostly in urban India and most of rural India is still deprived of these privileges. The government should first fix this before even dreaming of making a cashless India possible.

The Government of India took the whole country by storm by announcing the demonetization on 8th November 2016. 500- and 1000-rupees notes were no longer legal tender. This move was aimed at getting rid of the black money in the economy that was largely used to fund criminals and terrorists and formed a parallel economy. The acute shortage of cash led to long queues outside ATMs and banks trying to withdraw cash or exchange notes. This was all to initiate the fruition of a dream of cashless India.

With the enormous amount of technological revolutions happening, it is close to impossible to find people without a smartphone in these times. Almost every citizen possesses a smartphone. The ease of transaction through interfaces like GooglePay or PhonePe or Paytm has never been more seamless than this. The Indian government has also introduced interfaces like UPI or Unified Payments Interface for hassle-free digital transactions that are fully cashless.

In recent years, we have been asked to be in very less contact with each other. This is because of the communicable diseases of Covid-19 that have seen an adverse effect throughout India. For this reason, online payments have recently been the most popular means of transaction. The money will directly get transferred to the account of the user from our account; all you need to do is just download the app that you can use for the transaction. 

In the end, the demonetization step became crucial to start a cashless economy in the country. It has paved the way towards an economy in India that is defined by greater transparency and convenience and ease in monetary transactions.

FAQs on Cashless India Essay

1. Which Country is fully cashless?

There are a lot of benefits of going cashless and most of the benefits are discussed over here. Now the world is more focused on how to go cashless as they are well aware of the advantages that they will have after going cashless. This is the reason that most of the countries are seeking some changes and making constant efforts to make their country cashless. Going cashless will improve technologies and will also increase your economy. That is also one of the main reasons why this world is more focused on going cashless. Sweden could achieve a near cashless economy in the world.

2. Name the different Digital Currencies in the world?

Just as in terms of cash, we have rupees or dollars or pounds and so on. In the same way, it is not like only one kind of digital currency is used throughout the whole world. There are different kinds of currencies that the world uses for online transactions. Litecoin, Bitcoin, Ethereum are some of them that were found to be in existence as of 2020. You need to have good knowledge about these currencies and then you can easily transfer the money. 

3. What are the apps that you can use to transfer money directly into another person's account in India?

In India going cashless is the new normal. People are using online money apps such as Google pay, Paytm, Payz app, PhonePe to make the transactions directly through their phone and bank account but when we talk about the currencies being used currently, Indians are more preferably using bitcoins as their online currency. India is now making efforts to go cashless and increase its economy.

4. How much is India cashless now?

In recent years, at the time of Corona, it was advised to people not to make contact with each other. It was at that time that the cashless India concept was created and the apps like Google Pay etc came into existence. The app was introduced in India before it came into use. In the covid time, most people used the cashless way of payment. The census has proved that 37% of India has not paid using cash since the Corona times.

5. Is it possible to have cashless India anytime sooner?

Given the regency usage and increased usage of the apps such as Google pay and Paytm and the increase in the number of vendors who have accepted this method of online payment, the more India can be cashless. The most difficult thing will be to make the people of India agree to use these online methods of payment and move toward increasing the other economy of India. India too can be cashless; it is just that we need to create awareness among people regarding this.

Digital payments and consumer experience in India: a survey based empirical study

• Original Article
• Published: 05 January 2021
• Volume 5 , pages 1–20, ( 2021 )

Cite this article

• Sudiksha Shree 1 ,
• Bhanu Pratap 2 ,
• Rajas Saroy 2 &
• Sarat Dhal 2  

51k Accesses

21 Citations

Explore all metrics

Propelled by recent policy initiatives and technological developments, India’s digital payment system is a promising success story in the making. At the same time, the data also points towards an increasing usage of cash. While aggregate country-level data can indicate overall preferences of citizens, we use a novel online survey-based dataset to understand how factors such as ‘perception’ and ‘trust’ in digital payments, and experience with online frauds, affect the payment behaviour of consumers. While demographic factors like age, gender and income are relevant factors which determine this choice, we find compelling evidence that a person’s usage of digital payment methods is influenced by her perception of these instruments, as well as her trust in the overall payments framework and banking system in general. We find that the degree to which past-experience with online fraud deters usage of digital payments varies with the purpose of the transaction.

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• Artificial Intelligence

Avoid common mistakes on your manuscript.

1 Introduction

The consensus around the origin and the forms of ancient money has kept changing over the course of recorded history. But, what has not changed over the years is what money does; broadly, it facilitates trade in goods and services as medium of exchange and acts as a credible store of value. Modern day trade demands massive payments to be settled fast over long distances with minimum transaction cost. Evidently, to suit these needs the payment systems are being digitised globally. Cash, however, remains a crucial part of the trade. Therefore, the discourse on the current age payment system revolves around cash vs digital transactions.

While cash might seem convenient as it’s ingrained in our habits and is still readily accepted at more places, digital payments offer convenience by saving time and labour. There are further issues with cash use. While it provides a suitable alternative to aid the informal or parallel economy [ 3 , 21 ], digital payment offers itself as a desirable tool for institutions to fix this problem of traceability. In fact, governments around the world have taken drastic measures at huge costs to clear markets of ‘black money’. Research in the behavioural sciences conveys that people experience higher ‘pain of paying’ when paying in cash than digitally, and this contributes to deferred payments [ 17 , 19 , 20 ]. While cash may not seem to impose any direct transactional cost like digital money, it is still costly for both governments and end-users. A 2014 study found out that residents of Delhi spent around 6 million hours and ₹91 million to access cash, while the Reserve Bank of India (RBI) and commercial banks together spent about ₹210 billion towards currency related operating expenses in the same year. But on the other hand, there are also huge implicit costs to digitise the existing systems and nudge people to change [ 14 ].

In the last decade, India has rapidly digitised its payment systems and promises huge potential in the area. Digital payments recorded an increase of 46.5% in total volume in FY19 on top of an increase of 60.6% in FY18. The Unified Payments Interface (UPI), a payment system that was launched in 2016, has surpassed the milestone of a billion transactions per month. The progress in digitisation has been driven by a healthy mix of technological innovation, policy interventions, and expansion and strengthening of existing infrastructure on the supply side, coupled with an increasing proportion of the population adopting financial and digital instruments on the demand side. The government of India and the RBI have been working in synergy to push for policy and regulatory reforms. Enablers such as Jan Dhan accounts, Aadhaar and penetration of mobiles, and policies like Demonetisation and Goods and Services Tax have brought people closer to technology and banks. Recently, NEFT (National Electronic Funds Transfer) was made operational for 24 h on all days of the week, and RTGS (Real Time Gross Settlement) is expected to follow soon. The launch of UPI, along with already available digital payment modes like NEFT, IMPS, cards and Prepaid Payment Instruments (PPIs) has increased the options available to the consumer. The number of PoS (point of sale) terminals have also increased by about 40 lakhs in the last five years. PoS terminals and lightweight acceptance infrastructure such as QR codes have boosted Card/PPI based payments. Additional payment systems such as Bharat Bill Payment System (BBPS), National Electronic Toll Collection (NETC) system, RuPay cards and AePS have also boosted digital payments and the intent to incorporate modern-day technologies such as tokenisation and contactless payments will further the progress.

Despite this progress, cash use still seems to be on the uptick in India. Our paper seeks to highlight the important factors at the individual level, which influence the consumer’s decisions to use cash or digital payment. While it is critical to push for technological innovations and policy reforms, it is also imperative to understand the aspects that motivate or hinder the adoption of these technologies by the end-user. A recent survey [ 5 ], on the readiness of consumers towards adoption of newer payment technologies, ranked India second out of 27 economies on the FinTech adoption Index. Research conducted at the individual consumer level can provide an insight to understand how certain aspects are at play while making a payment decision. To this end, we use a comprehensive and multidimensional online survey which addresses many hitherto untouched dimensions of this topic, such as the difference in digital spending over various expenditure categories (groceries, e-commerce, utility bills, etc.), the choice of consumers to go purely digital or exercise a mix of cash and digital options, and the effect of psychological factors like perception and trust.

There is a dearth of studies and data covering the behavioural aspects at individual level that have an impact on choice of payment behaviour in the Indian economy. Given the massive heterogeneity of our population, different samples might produce disparate results. The High-Level Committee on Deepening Digital Payments [ 15 ] recommended that there should be periodic surveys to gauge user experience and attitude towards digital payments. The present study, is a small step towards filling the research gap in the context of such analysis.

Our key findings point towards a significant impact of perception of the payment system on how people choose to pay. Not only does a positive perception motivate people to go ‘digital’, but a relatively negative outlook on cash also has a similar impact. This finding is important in light of increasing cash use at the macroeconomic level in the country. Another significant factor is confidence in the payment system. Respondents who trust the service providers and regulators seem to have a greater likelihood of paying digitally. We find inconsistent behaviour when studying the impact of experience of digital payment fraud on choice of payment tool. The impact that experiencing such a fraud has on the choice to pay digitally differs according to the purpose of the transaction. The remainder of the study is presented in five sections pertaining to existing literature, data and methodology, sample summary statistics, empirical findings and conclusion and policy implications.

2 Related literature

The terms digital transaction, electronic transactions, paperless transaction or cashless transaction are almost used interchangeably in common parlance. The RBI Ombudsman Scheme for Digital Transactions (2019) defines digital transactions as “a payment transaction in a seamless system effected without the need for cash at least in one of the two legs, if not in both. This includes transactions made through digital/electronic modes wherein both the originator and the beneficiary use digital/electronic medium to send or receive money”. However, in our paper, a digital transaction is one where the payer and payee both use digital modes of payment.

Policies in many parts of the world are being designed in favour of non-cash payments because of the various problems that cash poses. Cash fuels the parallel or black economy, therefore, phasing it out might solve this problem, especially with large denomination notes [ 20 ]. The cost of printing, destroying and other cash related operational expenses in India are estimated at 1.7% of GDP [ 23 ]. Cash, however, remains a significant part of all the transactions in most countries [ 6 ].

While reading into data on the macro-level can give us a broad idea of people’s overall preferences, data at the individual level gives us an insight into how certain factors impact the choices/decisions consumers make regarding the mode of payment. Following this line of thought, several studies have analysed such issues at the level of the consumers. They reveal that the choice of payment method is impacted by a host of consumer-specific and technological factors. Transaction size has a significant impact on what mode of payment people choose. A cross- country comparison of payment diary survey data of seven countries showed that cash was the preferred mode of payment for smallest 50% and largest 25% of transactions [ 2 ]. In another study, social marginal costs were computed for various instruments for small and large transaction sizes and it was found that for larger transaction sizes, there were significant differences in cost for electronic vs non-electronic payments [ 8 ]. Studies show that demographic characteristics also play a significant role in how people choose to pay. It was found that better education and higher income lead to lower cash use compared to non-cash modes. Certain categories of age show a stronger preference for digital payments Bagnall et al. [ 2 ].

Consumer perceptions on safety/risk, convenience/ease of use, anonymity and costs have been shown to affect payment systems adoption significantly. Png and Tan [ 16 ] show that concerns about privacy emerged as one of the main psychological factors causing a bias towards cash for retail transactions. Kahn et al. [ 10 ] show that business in the unorganised economy was attributed to transactions that could be made in cash and did not reveal the agent’s identity. Bagnall et al. [ 2 ] analysed data from cross-country consumer diary surveys and found that consumers who rated cash high on ‘ease of use’ ended up using it more. In a study assessing payment perception of Dutch consumers, non-price parameters such as ‘acceptance’, ‘convenience’, ‘transaction speed’ and ‘safety’ were used to gauge the perception of payment instruments used at PoS terminals [ 9 ]. Several studies have used the Technology Acceptance Model (TAM) to show ‘perceived usefulness’ and ‘perceived ease of use’ have a significant impact on behavioural intention and thus, actual use of electronic payment systems [ 12 , 18 ].

Perceived trust in the payment system is shown to have a positive effect on the usage of digital modes of payment [ 13 ]. While the central bank and banks are traditional regulators and service providers of payments systems respectively, non-banks have also emerged as new players in the framework. A recent empirical study conducted by the Monetary Authority of Singapore [ 16 ] found that trust in banks impacts the nature of the transaction. A cross-country analysis shows that residents in countries that reported lower trust in banks preferred cash for making transactions. In some cases, while an increase in trust can lead to the opening of accounts, it might not translate to actual usage of those accounts [ 7 ]. Central banks also play a pivotal role in ensuring safety, integrity and stability of the payments system. Experience of online fraud can shape beliefs of perception and trust and can have a direct impact on payment behaviour. Media coverage of these incidents is shown to affect card payment [ 11 ]. The direction, strength and frequency of media coverage affected debit card use. Few studies show that people simply use digital modes of payment because they have exhausted their stock of cash in hand. It is called ‘cash first’ or ‘cash-burning’ and is perceived to be an optimal policy by the consumer [ 1 ]. Some studies also point that people still pay in cash simply because it is difficult to grow out of habits [ 9 ].

3 Survey data and empirical methodology

For the purpose of this study, primary data is collected using a structured questionnaire circulated online (Appendix 1). Following snowball sampling, the survey was shared on various social media platforms for better reach. The questionnaire was drafted in English and Hindi, to both expand and diversify the sample. It consists of 28 questions that are divided into seven sections viz. demographics, access to and usage of technology, awareness of different modes of digital payment, preference and perception on cash and digital payment systems, spending habits, experience related to fraud, and feedback on awareness campaigns.

Our study broadly aims to understand the impact of user perception, trust in payment systems, and experience of online fraud on the choice of mode of payment. For regression analysis, mode of payment is taken as the dependent variable and the independent variable is added to a baseline model according to the hypothesis being tested. Firstly, a baseline model is obtained for all five types of purchases—grocery, utilities, online shopping, durables, and gold. These transactions range from low to high value transactions. The responses recorded for different types of purchases have the following three alternatives:

Always pay in cash,

Always pay digitally, and

Sometimes pay in cash and sometimes digitally.

Since the dependent variable is categorical and has more than two categories, a multinomial logistic regression is best suited for regression analysis. A multinomial logit model is an extension of logit model, with more than two categories, in no particular order. Maximum likelihood estimation is used to obtain the parameters of the model.

Let the model have j  = 1, 2 …, J categories for the dependent variable y , and X be the matrix of independent variables. In a multinomial logit model, we estimate a set of coefficients β j  = ( β 1, β 2…, β J ) corresponding to each outcome j . Setting j  = 1 as the reference or base category ( i.e ., β 1  =  0) , we have:

The parameters of the model are reported in terms of odds or log odds. Given any two possible categories for the dependent variable:

where ( β m  −  β n ) is the  effect of X on log of odds of m versus n . To get parameters of other categories of the outcome, they are similarly compared to the common reference category. For our study, cash usage is taken as the reference category. We begin by creating a baseline logistic regression model by taking demographic characteristics such as gender, age, education, family income, occupation, and place of residence as categorical independent variables. The dependent variable is coded as:

y  = 0 for cash (reference)

y  = 1 for digital payments

y  = 2 for sometimes cash and sometimes digital payments

The following multinomial logistic model is estimated:

The parameter β kj is a vector of β 0j, β 1j … β kj where j ( j  = 0, 1, 2) is the category of dependent variable and there are K  +  1 ( k  = 0, 1, …, K ) independent variables. Since cash is the reference category, β k0 is set to 0. Therefore, β k1 and β k2 are respective log odds relative to the reference category.

Since, all the independent variables are categorical, they are coded as dummy variables. The reference categories for each of the independent variable in the baseline model are mentioned in the first column of Table 1 below.

Next, we add four additional independent variables of interest to the baseline model one by one, to observe the impact of perception (of both cash and digital payment modes separately), confidence in the payment system and fraud experience on the choice to pay digitally.

The perception of cash and digital modes of payment is recorded for four parameters- cost, convenience, safety and privacy/anonymity on a three-point Likert scale with the alternatives ‘bad’ (0), ‘okay’ (1) and ‘good’ (2). The mean score for perception is computed as the simple average of parameter-wise scores for cash and digital payments. Confidence in payment systems is measured on the parameters- trust in the RBI, trust in your payment service providers (e.g. FinTechs) and trust in stability and integrity of your bank. A five-point Likert scale is to measure responses, ranging from strongly agree (0) to strongly disagree (4). The mean score is computed as a simple average of the four parameters. Online fraud experience is quantified based on familiarity with such incidents. The respondents were asked to choose from following alternatives-

I have been a victim to digital payment frauds.

I have received such calls/mails/texts but carefully avoided them.

I have not received such calls/mail/texts but know someone personally who has been a victim.

I have not received such calls/mail/texts and do not know anyone personally who has been a victim.

4 Sample summary statistics

A snapshot of our sample of 640 respondents is given in Chart  1 . The respondents are mostly male and educated. Most of them are either salaried employees, working in the government or private sector. This may be due to the online nature of the survey, and circulation limited to the social circles of the authors, which occurred due to the enforcement of the COVID-19 induced nationwide lockdown in India during the survey period. Responses were received from twenty states of India. The corresponding districts were divided into three tiers according to the HRA (Housing Rent Allowance) classification by the Department of Expenditure, Government of India.

Demographic characteristic of the sample

The responses are summarised in Appendix 2. Awareness as well as usage regarding various digital payment instruments were high in the sample. It is important to keep this in mind while interpreting how payment behaviour is affected by other variables. Our respondents, being from the relatively well-off sections of society, were much more aware and comfortable with cards and UPI, rather than AEPS and USSD code-based payments. Digital mode was preferred for online shopping, paying utility bills, and purchasing durables (mostly medium to high value transactions). A combination of cash and digital modes was preferred for purchases of grocery and gold, which are starkly different in terms of transaction value. Being solely dependent on cash was relatively less preferable for all purposes.

The perception of cash and digital payments are recorded on four parameters viz., ‘convenience’, ‘cost of payment’, ‘safety’, and ‘privacy/anonymity’. It is observed that on an average, digital payments perform better than cash on all four fronts. Confidence in digital payment systems is assessed on four parameters, with regards to banks (preference for depositing money in a bank, as well as trust in one’s own bank), the central bank and in other participants like payment aggregators. Respondents seemed more confident in the RBI and banks, as compared to other service providers.

Technical issues, followed by low acceptance and lack of trust were identified as the major hindrances with digital payments. The experience of online fraud is divided into four categories based on their potential intensity of impact of the fraud. Out of 630 respondents that answered the question, 532 have had some experience of online fraud. Out of 411 respondents who had experienced the incident personally, a majority (279) reported no change in the nature of payments and only 26 mentioned that either they had completely switched to cash or had reduced the use of digital mode of transaction. Respondents were also asked if they reported the incident to the concerned authority after they experienced the fraud personally. Most of the respondents did not report the incident, especially if they had not faced any losses.

5 Multinomial regression model: results and analysis

The baseline model (Appendix 3) provides insights on the effect of demographics on the choice of mode of payment.

5.1 Effect of demographics on mode of payment

Males are more likely to use digital modes of transaction as compared to their female counterparts for both purely digital or a combination of cash and digital instruments. With respect to age, there is pressing evidence in the case of online shopping that older individuals are less likely to pay digitally. While the coefficients are not statistically significant for other kinds of purchases, their signs support this general observation. Education is also seen to have an enabling effect on people when it comes to going digital. The tendency to avoid paying solely with cash for groceries and utilities dwindles with an increase in the level of education of the respondent. Income levels have a statistically significant, positive impact when it comes to online shopping and gold purchases through the exclusively digital payment route. Lower income groups may prefer paying using cash on delivery. Occupation and place of residence have a significant impact on choice of mode of payment for mid and high-value transactions. Homemakers, unemployed and self-employed respondents are least likely to pay digitally. For place of residence, respondents living in Tier-1 cities are more likely to pay digitally.

In general, our results point out that more affluent and privileged groups are still more likely to go digital, compared to disadvantaged groups. Hence, while efforts to expand relevant infrastructure and nudge behavioural change are welcome, an upliftment of the general standard of living of the public, education and urbanisation may also be important ways to promote digitisation of payments.

5.2 Experience of online fraud

The experience of digital payment fraud is measured on a scale of four, with ‘0’ implying ‘I have been a victim of digital payment fraud, which is the highest possible impact of fraud on a person. At the other end, ‘3’ stands for ‘neither experienced digital payments fraud nor know anyone who has been a victim’. The baseline model is augmented with these additional categorical variables, and the results are presented in Table 2 . The reference category for the four fraud indicator variables is the response ‘3’, i.e., the respondent has neither been a victim of digital payment fraud, nor do they know of someone who has. Our paper highlights that frauds have differential impact based on the purpose of the transaction. For grocery payments, experiencing such frauds, first hand or otherwise, seems to demotivate people from using digital payment modes, but there is no such evidence for other types of transactions. In fact, respondents preferred using a mix of digital payments and cash for utilities and durables even if they had previously fallen prey to such frauds. It may be easier for consumers to switch to cash for grocery purchase, as compared to settling utility bills or buying durables.

5.3 Perception of cash vs digital payments

Perception of cash is scored on four parameters- cost of payment through cash, convenience of payment, privacy or anonymity concerns about the payment, and safety of payment. The scores range from 0 (bad) to 2 (good). The total score is computed by taking an average of all the four parameters. The total score is a continuous variable and is added to the baseline model. The resultant coefficient is reported in log odds. As is evident from Table 3 , perception of cash has a strong and significant impact on which mode of payment is chosen by the respondent. As the perception of cash improves, the likelihood of paying digitally decreases across all purchase categories. The reference alternative for payment is taken as payments made only/ always in cash, implying no (zero) relation with perception of cash. As perception improves the likelihood decreases most for grocery (low-value payment) and online payments and least for payments made for purchasing gold followed by durables, both high-value payments.

On the flip side, we also consider the total score for perception of digital payments, which is calculated similar to that for cash above. The coefficients (Table 4 ) are positive and statistically significant, implying that as perception improves, so does the likelihood of paying digitally. Here also, the reference alternative is using only cash. In terms of magnitude, the perception variables seem to affect grocery spends the most and gold spends the least. It can be inferred that a positive outlook on digital payment modes motivates the respondent to pay digitally. However, digital payments still have a long way to go if they are to prove themselves as good substitutes to the cheapness, convenience and privacy of cash use. Another observation from the above results is that high-value payments (gold and durables) are relatively less affected by perception of modes of payment, when compared to low- value payments (grocery).

5.4 Trust in payment system

Besides their perception of payment modes, respondents were also asked about their trust or confidence in the payment system as a whole, which was measured on four parameters. A five-point Likert scale is used, with ‘0’ or ‘strongly agree’ implying high confidence in the payment system and ‘4’, which stands for ‘strongly disagree’ implying extreme lack of confidence in the payment system. The total score is computed by taking an average of scores obtained on all the parameters. As expected, a deterioration in consumer confidence in digital payment systems (or an increase in the ‘lack of trust’ score) worsens the likelihood of paying digitally (Table 5 ).

At the end of the survey, respondents were also asked to give their feedback on digital payments. This gives us an indication of overall sentiments and main concerns of consumers towards digital payments. In Chart  2 , a ‘ wordcloud ’ based on 50 most frequently occurring words in the feedback highlights that consumers favour the ‘convenience’ offered by digital payment methods and have an overall positive sentiment towards such technology-based inventions.

Textual analysis on feedback

6 Conclusion

While governments, regulators and service-providers are working in synergy to enhance the electronic payments systems and related infrastructure, it makes sense to study how these options are perceived by the end-user. The key policy recommendation from our study is that incorporating feedback and gauging public perception can further catalyse digitisation. We observe through our study that perception of digital payment instruments affects the payment behaviour of an individual. Digital payments were not only driven by a positive outlook on digital payments but also a negative outlook on cash. Contrary to popular belief, customers were seen to be willing to discount online fraud experience in the face of higher convenience offered by digital payment modes. The impact of experiencing fraud on the choice to pay digitally differs according to the purpose of the transaction. Also, we cannot ignore the role played by demographic factors in better digital payment adoption. Digital payments adoption is expected to increase in line with the overall socioeconomic development of the population.

While our collected data is from a geographically diverse set of respondents, it is still limited to a certain part of the population. The data has been collected during a country-wide lockdown and therefore could only include respondents who were willing to fill the survey online (English or Hindi). Thus, most of the respondents were already digitally literate, educated and economically sound when compared to the population. This is one of the major limitations of the study. Further, since responses were collected in extraordinary circumstances of nationwide lockdown, they may be biased in the sense that these were times when many were compelled to pay digitally for fear of contracting COVID-19. Also, e-commerce and technology firms (with higher acceptance of digital payments) had stepped up their services, filling in the vacuum created by closure of brick and mortar stores. Various central banks around the world conduct payment diary surveys to gauge useful variables at the individual level and observe their impact on payment behaviour. In the future, surveys like these could be taken up with a broader sample and in a more structured manner, as things gradually return to normal.

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Survey on consumer experience and perception about digital modes of payments: questionnaire

See Appendix Tables 6 , 7 , 8 , 9 , 10 , 11 , 12 .

See Appendix Fig. 3 . 

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Shree, S., Pratap, B., Saroy, R. et al. Digital payments and consumer experience in India: a survey based empirical study. J BANK FINANC TECHNOL 5 , 1–20 (2021). https://doi.org/10.1007/s42786-020-00024-z

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DOI : https://doi.org/10.1007/s42786-020-00024-z

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NITI Aayog : Digital Payments Trends, Issues and Opportunities

• 27 Mar 2019
• 27 min read
• GS Paper - 3
• Fiscal Policy
• Infrastructure
• Government Policies & Interventions

A Committee on Digital Payments was constituted by Department of Economic Affairs, Ministry of Finance in August 2016 under Chairmanship of Ratan P. Watal to inter-alia recommend medium term measures of promotion of Digital Payments Ecosystem in the country. It submitted its final report to Finance Minister in December 2016.

Digital Payments

The Payment and Settlement Act, 2007 has defined Digital Payments, as any "electronic funds transfer" that is any transfer of funds which is initiated by a person by way of instruction, authorization or order to a bank to debit or credit an account maintained with that bank through electronic means and includes point of sale transfers; automated teller machine transactions, direct deposits or withdrawal of funds, transfers initiated by telephone, internet and, card payment.

Segments of Payment Systems

The payment system could be bifurcated into two main segments.

• Instruments which are covered under Systemically Important Financial Market Infrastructure (SIFMIs),
• Retail Payments.

Systemically Important Financial Market Infrastructure (SI-FMI)

Financial Market Infrastructure (FMI): It is defined as a multilateral system among participating institutions, including the operator of the system, used for the purposes of clearing, settling, or recording payments, securities, derivatives, or other financial transactions.

Under SIFMI, new standards (called principles) are designed to ensure that the essential financial market infrastructure(FMI) supporting global financial markets is even more robust and thus even better placed to withstand financial shocks than at present.

Under this segment (SIFMI) there are four instruments of payments :

• RTGS: Real Time Gross Settlement is defined as the continuous (real-time) settlement of fund transfers individually on an order by order basis (without netting). 'Real Time' means the processing of instructions at the time they are received rather than at some later time; 'Gross Settlement' means the settlement of fund transfer instructions occurs individually (on an instruction by instruction basis). This system is primarily meant for large value transactions. The minimum amount to be remitted through RTGS is ` 2 lakh. For inter-bank fund transfer there is no floor.
• CBLO: Collateralized Borrowing and Lending Obligation (CBLO) is a money market instrument developed by Clearing Corporation of India Ltd. (CCIL), introduced in 2003. This represents an obligation between a borrower and a lender to the terms and conditions of a loan. It also does not entail physical transfer of respective securities from borrower to lender or vice versa.
• Government Securities: A Government Security (G-Sec) is a tradeable instrument issued by the Central Government or the State Governments.
• Forex Clearing: The term ‘Forex’ stands for Foreign Exchange. In simple terms it is the trading in currencies from different countries against each other. In India the settlement of Forex transactions is done by CCIL which was started in 2002.

Retail Payments

Under the Retail Payments segment which has a large user base, there are three broad categories of instruments. They are (1) Paper Clearing, (2) Retail Electronic Clearing, (3) and Card Payments . The instruments under these three categories are discussed below:

• Cheque Truncation System (CTS): CTS or online image-based cheque clearing system is a cheque clearing system undertaken by the Reserve Bank of India (RBI) for faster clearing of cheques. It eliminates the associated cost of movement of physical cheques.
• Non-MICR: The Non-MICR clearing refers to the process of manual clearing of cheques where the cheque is physically moved between the bank branches/banks for clearing. MICR (magnetic ink character recognition) is a technology used to verify the legitimacy or originality of paper documents, especially checks.
• ECS DR/CR: ECS (Electronic Clearing System) is an electronic mode of payment / receipt for transactions that are repetitive and periodic in nature. DR/CR is ‘Debit Record or Credit Record’. ECS facilitates bulk transfer of monies from one bank account to many bank accounts or vice versa. ECS includes transactions processed under National Automated Clearing House (NACH) operated by National Payments Corporation of India (NPCI).
• NEFT: National Electronic Funds Transfer (NEFT) is a nation-wide payment system facilitating one-to-one funds transfer. Under this scheme, individuals, firms and corporates can electronically transfer funds from any bank branch to any individual, firm or corporate having an account with any other bank branch in the country participating in the scheme.
• IMPS: Immediate Payment Service (IMPS) offers an instant 24X7 interbank electronic fund transfer service through mobile phones. IMPS is an emphatic tool to transfer money instantly within banks across India through mobile, internet and ATM . It is offered by National Payments Corporation of India (NPCI).
• UPI: Unified Payments Interface (UPI) is a system that powers multiple bank accounts into a single mobile application (of any participating bank), merging several banking features, seamless fund routing & merchant payments into one hood.
• *99#: USSD based mobile banking service of NPCI was initially launched in November 2012. The service had limited reach and only two TSPs (Telecom Service Provider) were offering this service i.e. MTNL & BSNL. Understanding the importance of mobile banking in financial inclusion, *99# was dedicated to the nation by Hon’ble Prime minister on 28th August 2014, as part of ‘Pradhan Manti Jan Dhan Yojna’.
• USSD (Unstructured Supplementary Service Data) is a Global System for Mobile (GSM) communication technology that is used to send text between a mobile phone and an application program in the network.
• NACH: “National Automated Clearing House (NACH)” is a service offered by NPCI to banks which aims at facilitating interbank high volume, low value debit/credit transactions, which are repetitive and electronic in nature. It allows participating banks for centralized posting of inward debit/credit transactions and is run by NPCI.
• Credit Card: A credit card is a card issued by a financial company which enables the cardholder to borrow funds. The issuer pre-sets borrowing limits which have a basis on the individual's credit rating. These cards can be used domestically and internationally and can also be used to withdraw cash from an ATM and for transferring funds to bank accounts, debit cards and prepaid cards within the country.
• Debit Cards: A debit card is a payment card that deducts money directly from a consumer’s bank account to pay for a purchase and eliminate the need to carry cash or physical checks to make purchases. In addition, they offer the convenience of credit cards for small negative balances that might be incurred if the account holder has signed up for overdraft coverage. However, debit cards usually have daily purchase limits.
• Closed System PPIs: These PPIs are issued by an entity for facilitating the purchase of goods and services from that entity only and do not permit cash withdrawal .
• Semi-closed System PPIs: These PPIs are used for purchase of goods and services, including financial services, remittance facilities, etc., at a group of clearly identified merchant locations/establishments which have a specific contract with the issuer (or contract through a payment aggregator/payment gateway) to accept the PPIs as payment instruments. These instruments do not permit cash withdrawal .
• Open System PPIs: These PPIs are issued only by banks and are used at any merchant for purchase of goods and services, including financial services, remittance facilities, etc. Banks issuing such PPIs shall also facilitate cash withdrawal at ATMs/Point of Sale (PoS)/Business Correspondents (BCs).

Evolution of Digital Payments in India

• India’s digital payments system - has been evolving robustly over the past many years, spurred by developments in information and communication technology, and fostered in consonance with the path envisioned by the Reserve Bank of India .
• National Payments Corporation of India (NPCI) was established in 2008–has been spearheading the development of the retail payments system .
• Introduction of MICR clearing in the early 1980s. It is online image-based cheque clearing system where cheque images and magnetic ink character recognition (MICR) data are captured at the collecting bank branch and transmitted electronically.
• Electronic Clearing Service and Electronic Funds Transfer in the 1990s.
• Issuance of credit and debit cards by banks in the 1990s.
• National Financial Switch in 2003 that brought about interconnectivity of ATMs across the country.
• RTGS and NEFT in 2004.
• Cheque Truncation System (CTS) in 2008. Cheque Truncation System (CTS) or Image-based Clearing System (ICS) is for faster clearing of cheques. Cheque truncation means stopping the flow of the physical cheques issued by a drawer to the drawee branch.
• 'Card not present' transaction in 2009. It is most commonly used for payments made over Internet, but also mail-order transactions by mail or fax, or over the telephone.
• New RTGS with enhanced features in 2013 that required banks to adopt ISO 20022 standard messaging formats. The objective of introducing ISO 20022 standard message format for payment system is to bring about standardisation in the messaging formats for various payment systems in the country and to conform to international standard.
• Non-bank entities have been introduced in the issuance of pre-paid instruments (PPI), including mobile and digital wallets. BHIM (Bharat Interface for Money) is a mobile payment App developed by the National Payments Corporation of India (NPCI), based on the Unified Payments Interface (UPI).
• These developments capture the evolution of the Digital Payments ecosystem in the country. It resulted in setting up Committee of Digital Payments in 2016 under the Chairmanship of Shri. Ratan P. Watal, Principal Adviser, NITI Aayog.

Trends during 2016-17 and 2017-18

The demonetization in early November 2016 and other series of measures announced by the Government and the RBI to promote the movement from cash to non-cash modes of transactions impacted the volume and value of payments systems.

Volume: Instrument Wise Growth Trends (Data source – RBI)

• Transactions relating to IMPS, PPI and Debit card had exhibited growth rates in triple digits in the year 2016-17. This growth trend however has slowed down in 2017-18 and all these instruments exhibited double digit growth.
• UPI has grown multi-fold in the year 2017-18 and touched 915.2 mn transactions in 2017-18. This instrument had minimal presence in year 2016-17.
• The volume of paper clearing had been persistently showing negative growth throughout the year 2017-18 compared to the positive growth in 2016-17.
• NEFT volumes had showed an impressive increase in 2016-17. It continued to grow in 2017-18 albeit a slower pace.

New Modes of Digital Payments

In addition to UPI which was introduced recently, several other modes have been introduced by NPCI.

• Bharat Bill Payment System (BBPS): Bharat Bill Payment System is a tiered structure for operating a unified bill payment system . NPCI functions as the authorised Bharat Bill Payment Central Unit (BBPCU), which is responsible for setting business standards, rules and procedures for technical and business requirements for all the participants. Under BBPS the Bharat Bill Payment Operating Units (BBPOUs) will function as entities facilitating collection of repetitive payments for everyday utility services, such as, electricity, water, gas, telephone and Direct-to-Home (DTH) .
• Bharat Interface for Money (BHIM): Bharat Interface for Money is a mobile application that enables simple, easy and quick payment transactions using Unified Payments Interface (UPI). Instant bank-to-bank payments and Pay and Collect Options are facilitated using just Mobile number and Virtual Payment Address (VPA). The application was launched by NPCI.
• Bharat Quick Response Code Solution (Bharat QR): An interoperable solution for QR code, developed by NPCI, MasterCard and Visa. Merchants can display these QR codes at their premises and customers can pay through linked account by scanning these QR codes via Bharat QR enabled application in an interoperable environment.

Growth Drivers for Digital Payments

• In 2017-18, the Volume segment in Digital Payments is dominated by Debit Cards, PPIs and IMPS . These, together constitute close to 50 % of the total volume of Digital Payments. Their combined share in 2011-12 was about 14%.
• In 2017-18, Value segment is dominated by RTGS and NEFT . These together constitute about 53 % of the total value of Digital Payments, which is almost same as in 2011-12.

Authorized Payment Service Providers

• Reserve Bank of India under the Payment and Settlement Systems Act, 2007 issues Certificates of Authorization for Setting up and Operating Payment System in India.
• Board for Regulation and Supervision of Payment and Settlement Systems Regulations, 2008.
• Payment and Settlement Systems Regulations, 2008.
• The 58 banks permitted to issue pre-paid cards in India as on 22nd June 2018.

Digital Payments Service Charges

• RTGS Service Charges: These charges would consist of monthly membership fee and processing charges per transaction.
• Inward transactions at destination bank branches (for credit to beneficiary accounts) – Free, no charges to be levied on beneficiaries.
• Outward transactions at originating bank branches – charges applicable for the remitter. Originating banks are required to pay a nominal charge of 25 paise each per transaction to the clearing house as well as destination bank as service charge. However, these charges cannot be passed on to the customers by the banks.
• PPI/Mobile Banking/IMPS/USSD: No charges are prescribed by RBI and the charges are determined by the entity. As a temporary measure, it was decided that all participating banks and Prepaid Instrument (PPI) issuers would not levy any charges on customers for transactions up to Rs. 1000 settled on the Immediate Payment Service (IMPS). Also, no charges are levied on USSD-based *99# and Unified Payment Interface (UPI) systems.

Policy Initiatives

In Union Budget 2017-18, major policy announcements were made by the Finance Minister for promoting Digital Payments.

• Amendment of Payment and Settlement Systems (PSS) Act, 2007 for structural reforms in the payment ecosystem is under process.
• For promotion of the BHIM app, the Government has approved two promotional schemes namely ‘Referral Bonus scheme for individuals’ and ‘Cash-back scheme for merchants’.
• For promotion of BHIM Aadhaar, a promotional scheme with total outlay of Rs 395 under the name ‘DIGIDHAN MISSION’ has been established.
• BHIM Aadhaar Pay was launched by government of India on 14th April, 2017 as a merchant based mobile application for accepting payments from customers.
• 3 BHIM schemes i.e. ‘BHIM Referral Bonus scheme for individuals’, ‘BHIM Cashback scheme for merchants’ and ‘BHIM Aadhaar Merchant Incentive scheme’.
• Financial Inclusion Fund of NABARD is proposed to be augmented with Rs. 439.202 crore.

Major policy initiatives have been taken by RBI

• NEFT system – Settlement at half-hourly intervals instead of hourly from 8:00 am to 7:00 pm on all working days.
• RBI had issued guidelines for issuance and operations of prepaid payment instruments (PPIs) in 2009 in order to foster an orderly development of the PPI ecosystem.
• Based on past experience, Master Directions on the subject was placed in the public domain for comments on March 20, 2017 and decided to rationalize the operational guidelines to encourage competition and innovation, and strengthening safety and security of operations, besides improving customer grievance redressal mechanisms.
• Revised framework will pave the way for bringing inter-operability amongst KYC compliant PPIs.
• Small Merchants (with turnover up to Rs. 20 lakh last financial year), MDR Not exceeding 0.40% (MDR cap of rupees Rs. 200 per transaction).
• Other Merchants (with turnover more than Rs. 20 lakh last financial year), MDR Not exceeding 0.90% (MDR cap of rupees Rs. 1000 per transaction).
• The revised MDR aims at achieving the twin objectives of increased usage of debit cards and ensuring sustainability of the business for the entities involved.
• All system providers shall ensure that the entire data relating to payment systems operated by them are stored in a system only in India.
• System providers shall submit the System Audit Report (SAR) conducted by CERT-IN (The Indian Computer Emergency Response Team) to RBI.

Emerging Global Trends

As per the report of Capgemini on ‘Trends in Payments 2018’ , the Top 5 trends in Digital Payments across the world are as follows:

• Contactless payments enable consumers to make everyday purchases quickly and safely especially for low-value transactions. (Contactless payment is a secure method for consumers to purchase products or services via debit, credit or smartcards (also known as chip cards). To make a contactless payment, a person simply needs to tap their card near a point-of-sale terminal & do not require a signature or a PIN, transactions sizes on cards are limited) .
• Augmented Reality (AR)-integrated payment gateway delivers a superior customer experience. Mastercard now allows customers to log in to the mobile payment app Masterpass by scanning their iris (one of the safest means of facial recognition).
• The current cross-border payments model lacks an international clearinghouse and relies on correspondent banks, which causes inefficiency, slow speed, and high cost. As a result, corporate customers are demanding transformation.
• A distributed ledger-based cross-border payments model is expected to result in improved efficiency, enhanced security, and lower costs.
• Instant payments ‘new normal’ for corporate treasurers, industry: Banks are leveraging instant payments platform to connect with third parties to deliver better digital customer experience and provide innovative products and services to both retail and corporate customers.
• Based on estimates, cyber-attacks cost the global economy 1% of annual GDP .
• The cyber insurance industry grew 35% in 2016 to $1.35 billion in terms of direct written premium, which shows that corporates are looking to protect themselves from liabilities related to cyber-security laws.
• Lack of harmonization in cyber-security laws in different countries is a challenge for multinational companies operating across the globe.
• Regulators across the world are bringing in new cyber-security regulations and standards which could impose heavy fines, injunctions, audits, even criminal liability on firms for a data breach.
• Payments Infrastructure rationalization is likely through mergers and acquisitions to expand the reach of the payments firms, increase their value proposition to meet changing customer expectations, and create customized solutions.

( Capgemini: A global leader in consulting, technology services and digital transformation, Capgemini is at the forefront of innovation to address the entire breadth of clients’ opportunities in the evolving world of cloud, digital and platforms.)

Opportunities

• Mobile payments are expected to grow from US$10 billion in FY18E to US$190 billion by FY23E.
• The Digital Payment ecosystem in India is undergoing a transformation with the entry of global tech giants like Google’s payments app that are acting as aggregators for retail transactions.
• Paytm – which has 7 million merchants – now becoming a bank and post the launch of Google Tez and PhonePe , which are also focusing on merchant payments, a steep rise in digital payments could be expected .
• While the number of PoS (Point of Sale) terminals has doubled since demonetization, the merchant acquisition infrastructure (is a mechanism of providing necessary infrastructure and facilitating payment for goods and services purchased through medium of a card) in India remains weak, as banks have not been able to drive adoption. This sector presents immense opportunities for digital players.

Way Forward

The different components of Digital Payments have to be comprehensively studied with respect to global best practices and the list of indicators which are universally acceptable and relevant in the current context may be considered by RBI.

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Despite operational risks, data shows digital payments cruising ahead

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First Published: Aug 22 2024 | 11:09 PM IST

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Digital Payments and Monetary Policy Transmission

Fisher College of Business WP No. 2024-03-014 and Charles A. Dice Center WP No. 2024-14

56 Pages Posted: 22 Aug 2024

Pauline Liang

Stanford Graduate School of Business

Matheus Sampaio

Northwestern University

Sergey Sarkisyan

Ohio State University (OSU) - Department of Finance

Date Written: August 21, 2024

We examine the impact of digital payments on the transmission of monetary policy by leveraging administrative data on Brazil's Pix, a digital payment system. We find that Pix adoption diminished banks' market power, making them more responsive to changes in policy rates. We estimate a dynamic banking model in which digital payments amplify deposit demand elasticity. Our counterfactual results reveal that digital payments intensify the monetary transmission by reducing banks' market power-banks respond more to policy rate changes, and loans decrease more after monetary policy hikes. We find that digital payments impact monetary transmission primarily through the deposit channel.

Keywords: Digital payments, monetary policy transmission, banking

JEL Classification: E42, G21, E52

Suggested Citation: Suggested Citation

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"Daily UPI Transactions In India Equal To European Union Population": PM Modi

PM said, "Every day in India, the number of digital transactions made through UPI is equivalent to the population of the European Union."

In first 20 days of August, India recorded a staggering 9,840.14 million UPI transactions.

Speaking at the Indian Diaspora event in Warsaw on Wednesday, Prime Minister Narendra Modi highlighted the significance of digital transactions by drawing a comparison, noting that the daily volume of digital transactions conducted through UPI in India now matches the entire population of the European Union.

Union Minister Ashwini Vaishnaw highlighted success of India's Digital Public Infrastructure posting a clip of the PM's speech in a post on X saying "448 million -> Population of EU; 466 million -> Daily UPI transactions in India."

448 million -> Population of EU 466 million -> Daily UPI transactions in India #PMModiInPoland pic.twitter.com/qHIOJmdcah — Ashwini Vaishnaw (@AshwiniVaishnaw) August 22, 2024

In the first 20 days of August alone, India recorded a staggering 9,840.14 million UPI transactions, reflecting the platform's growing importance in facilitating cashless transactions across the nation.

This milestone underscores the rapid adoption and integration of the Unified Payments Interface (UPI) in India, which has become a cornerstone of the country's digital economy.

The success of UPI is reflected in its impressive growth metrics. According to NPCI, UPI payments have recorded a 45 per cent year-on-year growth, with the total value of transactions surpassing Rs 20.64 trillion.

This marks the third consecutive month where the total transaction value exceeded Rs 20 trillion, with June 2024 recording Rs 20.07 trillion and May 2024 at Rs 20.44 trillion.

In July 2024, the average daily transaction value through UPI stood at Rs 466 million, or approximately Rs 66,590 crore, showcasing the platform's dominance in India's digital payment ecosystem.

The Reserve Bank of India (RBI) has also acknowledged the extraordinary growth of UPI in its monthly bulletin, noting a ten-fold increase in transaction volume from 12.5 billion in 2019-20 to 131 billion in 2023-24. This accounts for 80 per cent of the total digital payment volumes in the country, highlighting UPI's critical role in India's cashless economy.

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Unified Payments Interface (UPI) transactions experienced a substantial 57 percent year-on-year growth in FY24, driven by the widespread adoption of digital payments across various sectors.

Within this segment, PhonePe and Google Pay have emerged as market leaders, holding a combined market share of 86 percent, according to the Boston Consulting Group (BCG) Banking Sector Roundup for 2023-24.

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Gst sleuths tracking merchants skipping tax via digital payments.

The rapid growth of digital payments prompted increased scrutiny of online merchants by the DGGI due to rising tax evasion cases and GST frauds. Authorities worked with startups and payment gateways to monitor proper GST invoicing. Continuous monitoring and vigilance were required to identify and correct anomalies in merchants’ activities, highlighting the need for rigorous due diligence from payment aggregators.

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Airtel Payments Bank launches face match to secure customer accounts with selfie verification

Airtel payments bank has introduced a new security feature called face match to protect customers from potential fraud..

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• Airtel Payments Bank has launched a new security feature called Face Match to prevent fraud
• Face Match monitors account activity and requires a selfie for verification if suspicious activity is detected
• This feature aims to ensure only the account holder can access their account, enhancing online banking security

Airtel Payments Bank has rolled out a new security feature called Face Match, aimed at protecting its customers from potential fraud.Imagine you have a savings account with Airtel Payments Bank. Now, like many people, you probably use your smartphone or computer to check your balance, transfer money, or pay bills. But with so much of our banking happening online, there’s always the risk that someone could try to access your account without your permission. That’s where Face Match comes in.

How Does Face Match Work?

Face Match is a smart security tool that keeps an eye on how you usually use your account. It looks at things like how often you log in, where you’re logging in from, the types of transactions you make, and other patterns. If it notices anything unusual—like a big transaction from a new location—it calculates something called a "threat score."

If your account’s activity seems risky, Face Match kicks in to make sure it’s really you trying to use the account. Here’s how it works: Airtel Payments Bank will send you a notification on your phone, telling you that Face Match has been activated. You will be asked to quickly take a selfie using the Airtel Thanks app. This selfie is then compared to the photo you originally provided when you opened your account.

The app uses advanced technology to make sure the person in the selfie is actually you. If the selfie matches your original photo, you can go ahead and complete your transaction without any trouble. But if something doesn’t match, the system will block the transaction, and you’ll be asked to visit a nearby bank location for further verification using your fingerprint.

Why Is This Important?

With the rise of online banking, fraudsters are getting smarter and finding new ways to trick people and steal money. They might try to take over your account, use it for illegal activities, or transfer money without your knowledge. Face Match is designed to stop these bad actors in their tracks by making sure only you can use your account.

Anubrata Biswas, the CEO of Airtel Payments Bank, explained that the bank is committed to keeping customers safe. Face Match is one of the ways they’re doing this, by using the latest technology to make online banking both secure and easy to use.

In simple terms, Face Match helps give you peace of mind. It ensures that your money is safe and that only you can access your account, even if someone tries to trick the system. Airtel Payments Bank’s new feature is a step towards making online banking safer for everyone, especially in a world where digital threats are becoming more common.

Published By: Ankita Chakravarti Published On: Aug 22, 2024

Amazon considers moving Amazon Pay into a standalone app in India

Amazon is considering shifting its payments offerings in India into a standalone app, three sources familiar with the matter told TechCrunch, as the e-commerce giant aims to boost usage of Amazon Pay in the country.

Amazon Pay is currently housed within the company’s primary e-commerce app in India, and lets users transfer money to individuals and merchants, pay bills, purchase insurance and travel tickets, invest in mutual funds and digital gold, and buy travel tickets.

The U.S. tech giant has been contemplating decoupling its payments service from the e-commerce app for about a year and intends to proceed with the plan in the coming months, two of the sources said.

Amazon has already reached out to the NPCI for approval, another person familiar with the matter said. The company has been told that it will likely have to issue fresh UPI IDs to users, sources familiar with the situation said, something Amazon sees as a thorny requirement.

Some executives at Amazon believe Amazon Pay is not receiving adequate attention on the e-commerce app, one source said, adding that a separate app with a singular focus could help the payments platform gain wider recognition in the country. 

The sources requested anonymity as the discussions are confidential and ongoing. They cautioned that Amazon, grappling with many other challenges in India , may alter its plans and could still abandon the idea.

An Amazon spokesperson declined to comment, describing the news as speculation.

Amazon Pay ranks sixth among apps on Unified Payments Interface, a payments network that is the most popular way Indians transact online. In July, Amazon Pay processed about 72.4 million transactions, accounting for about 0.5% of all transactions on the network, according to official data. In comparison, Walmart’s PhonePe processed 6.9 billion transactions, while Google Pay handled 5.3 billion.

Amazon isn’t alone in weighing similar options in India, where China-style super app strategies haven’t seen much success. Its chief Indian rival, Flipkart, late last month consolidated its fintech offerings into one vertical, two years after separating from PhonePe . 

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