Digital payments are on turbo mode in India, with everyone from the government to industry bodies and market players making rosy projections. While a study done by PwC for the industry body Assocham and released on Sunday night estimates a doubling of digital payments transaction value in four years time, a government committee envisages nothing short of a ten-fold rise in the next three years.
The Assocham study projects that digital transactions will double from 64.8 billion dollars this year to 135.2 billion by 2023, at a compounded annual growth rate of 20.2 per cent. This will put India's growth rate in digital payments ahead of that of China, which is at 18.5 per cent, as well as that of the US, which is at 8.6 per cent.
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But last fortnight's report released by the Nandan Nilekeni-headed Reserve Bank committee is even more ambitious; it sets out a roadmap for raising digital transaction volumes ten times over the next three years.
Digital payments in India took hold over the past few years, initially through e-wallets services like Vijay Shekhar Sharma's PayTM, and PhonePe. The demonetisation in 2016 was the fillip it needed, as the 'cash less' society took to these services to make ends meet, virtually. The year 2016 also saw the establishment of the National Payments Corporation of India (NPCI) which came out with the Unified Payments Interface (UPI).
UPI essentially facilitates transfer of money between two bank accounts, or rather account holders, but without involving cumbersome banking procedures or formalities. The transfer is done through registered mobile devices with their own unique UPI ID. For example, a customer stopping at a grocery store during his morning stroll can pay for his bread, milk and eggs by linking to the shopkeeper's UPI id through a PoS (Point of Sales) device and then keying in a one time password (OTP) that is instantly generated. In a few seconds using a single click, two-factor authentication, the transaction is complete, with the back-end software taking care of deducting the amount from the bank account. No need to carry cash, card or enter complex bank account or CVV details like in other modes!
For this, Nilekeni's RBI committee envisages carpet bombing the Indian countryside with PoS machines at kirana stores, banks and ATMs. At the end of 2017, India had 30 lakh PoS according to RBI, however, this needs to multiply manyfolds for the kind of growth the government is looking at. The idea is to make digital transactions using one's mobile phone commonplace through the 'cash in, cash out' system by targetting high volume, low value transactions like grocery shopping, mobile top ups, utility bills as well as tickets. There are even more ambitious recommendations from the committee to the government – making transactions completely free, as well as enabling PoS to dole out cash in return for digital payments at kirana stores a la 'a poor man's ATM', according to some reports.
“The rise of digital commerce, innovation in payments technology using artificial intelligence, Internet-of-Things (IoT), real time payments and the introduction of mobile PoS devices have led...to the growth of digital payment,” according to the Assocham report, which also points out how the digital payments landscape in India has been transformed to now include telecom players, banks, e-wallet companies and e-commerce retailers.
The report envisages that the key growth driver for digital payment would be inter-operability between the players, whose number has reached almost 50 in India, so that transactions can happen between two different service providers (like, say, between a customer holding PayTM and a shopkeeper who has BHIM, the govt's own UPI app) at any enabled merchant outlet.
According to NPCI, there were 300 crore UPI transactions last year, and 80 crore in just the first three months of this year. Though India's share of the global transaction value of digital payments is set to increase from 1.56 per cent to 2.02 per cent in the next four years, China still remains the leading player, according to the Assocham-PwC report.
