Status of
Digital Payments System in India:
·
UPI transactions leading among other digital
payment transaction methods
o From June 2021
to April 2023: UPI Payments grew at an average monthly rate of 6% compared to
NEFT, IMPS and Debit card payments growth at 3%, 3% and 1.5% respectively.
o The share of
UPI in total value of digital retail payments grew from 20% in mid-2021 to 27%
in March,2023.
·
World Bank Global Findex Survey
o 80% of population had bank accounts in 2017 & 2021 compared to 53% of the population in 2014, an indication of financial inclusion.
Factors that
facilitated the growth of Digital Payments in India:
1. Demonetisation
in 2016.
2. COVID-19
lockdown pushing for contactless payments.
3. Features of the
Digital Payment system:
a. Instant and
convenient mode of payment using mobile number or virtual payment addresses.
b. Access to
multiple bank accounts using a single mobile app, favouring ease of payments.
c. Disadvantages
of time consumption and physical access to a bank is offset by the advantages
of digital payments – anytime, anywhere speedy transactions.
d. Enhanced credit
access as digital payments by the user shall establish a financial footprint,
increasing access to formal financial services such as loans.
e. Safe and Secure
due to multiple levels of authentication
required for making transactions
4. Other factors:
1. Introducing
Digital payment methods such as UPI (Unified Payments Interface) has
facilitated Ease of digital transactions.
2. It has served
as a push factor for financial inclusion in India
3. Has
enhanced the quality and strength of the financial sector
Hurdles in
achieving Digital India:
1. Of the 80%
population having bank accounts, 38% of the bank accounts have Inactive
accounts.
a. Opening of
Jan-Dhan accounts
b. Opening of Zero-balance
accounts to meet official targets.
2. Gender
disparity
a. More women
(32%) than men (23%) have inactive accounts.
b. While 41% of
male population, only 28% of women carry out digital transactions in India.
3. Rural-Urban
divide
a. Inactive account in Rural areas (31%) is higher than in Urban areas (23%), especially in the North, North-East and Central States.
b. Among the poorest 40% of Indians – 35% of them have inactive accounts.
4. Only 35% of the
population carry out digital transaction in 2021 which is less than the global
average of 57% for all developing countries.
Way Forward:
1. Expanding
Merchant acceptance by rapid deployment of low cost QR codes and engagement
through integrated POS solutions.
2. Infrastructure
push and set up of a financial services marketplace driving growth in
underpenetrated regions.
· In the 2022 Budget speech: A financial
services marketplace could be developed by the large network of post offices
that are linked to the core banking system and the Digital Banking Units (DBUs)
set up by the banking ecosystem.
3. Access to
reliable internet and inexpensive mobile data.
4. Digitized value
chains increasing digital payment adoption
5. IoT, 5G and
CBDC (Central Bank Digital Currency) lending further impetus to the next
generation payment methods of M to M (Machine to Machine) transactions.
With 2 out of 3
transactions to be digital transactions in the future as opposed to 2 out of 5
transactions today, timely governmental interventions with technological push
shall enable India to achieve $1 trillion Digital economy in the next few
years.
