Indian Digital Payments Ecosystem: Solving Deep Human Problems Using Deep Tech solutions
[Blog by: Kunal Kalawatia, Chief of Products, National Payments Corporation of India.]
Every morning, Mr Bhalla, a kirana store owner, opens his shop to customers. Earlier, he primarily accepted payments in cash from customers. In the process, managing cash daily became an issue for him, entailing travel to the bank to deposit money, maintaining cash flow, and exercising vigilance to avoid pilferage and damage to notes. During the lockdown, he reluctantly added the option of collecting payments from customers via UPI QR scan-and-pay. Now, much of his money gets deposited directly into his account, helping him maintain a reliable account of his daily earnings and purchases from vendors, and he no longer has to worry about cash safety or the hassle of managing petty change.
For millions like Mr Bhalla, UPI has become a boon for their small businesses. Digital payments today have enhanced not only the ease of doing business for businesses but has also enhanced the ease of living for individuals across India. A person can now easily send or receive wages, remittances and government payments instantly with a virtual payment address. This digital push has been aided in no small measure by the Government of India’s initiatives: Aadhaar to give an electronically verifiable identity, Pradhan Mantri Jan Dhan Yojana (PMJDY) for financial inclusion, the Digital India programme for digital empowerment, and a wide range of policy measures and programmes to drive digitalisation and encourage fintechs. All this has eased millions of Indians – both urban and rural – into the digital economy.
Diverse technological payments solutions for a diverse nation
Diverse segments have diverse needs and aspirations — the young and on-the-go audiences want smart, contactless payments options; those more comfortable with physical form factors or interested in attractive deals from banks want card payments; citizens in the hinterland want feature phone payments. To address such diverse needs and aspirations, India has fashioned a wide array of home-grown digital payment instruments — the Unified Payments Interface (UPI) for instant peer-to-peer and person-to-merchant payments; the RuPay card for reaching card payments to the masses; the Aadhaar enabled Payment System (AePS) for enabling biometric-identity-based direct benefit transfer and near-doorstep banking through business correspondents; FASTag for electronic toll collection; the Bharat Bill Payment System (BBPS) for hassle-free payment of bills. All these bear testimonies to India’s mettle in developing a revolutionary technology framework in the digital payments space.
In particular, India’s UPI represents a diverse solution designed to allow a wide range of use cases to be built on it, reducing cost, boosting collaborations, and increasing the speed of innovation in the ecosystem. UPI has inherent strengths as a population-scale solution that is interoperable and allows users to transfer money on a real-time basis across multiple bank accounts without revealing details of the remitter’s bank account to the recipient party. UPI has transformed how Indians are making payments: in June 2022 alone, NPCI processed 586 crore transactions worth ₹ 10.14 lakh crore.
Similarly, India’s AePS is facilitating banking services in hitherto unbanked remote and rural areas using Aadhaar authentication. It has proved to be been a game-changer for the Government in disbursing payments in cash at the last mile through business correspondents /Bank Mitras using handheld microATM devices. AePS has steadily gained traction, with the number of AePS-based transactions increasing significantly over the years. In the financial year 2021, over 340 million Indians enjoyed doorstep banking through AePS.
With over 714 million RuPay cards issued till date, RuPay, the first-of-its-kind global card payments network from India, is continuously innovating through disruptive use-cases like contactless payments using near-field communication and other evolving payment technologies like wearables (in the form of watches, keychains, etc.), tokenisation to avoid frauds and unauthorised transactions, etc.
BBPS, on the other hand, has provided an organised one-stop platform for facilitating recurring bill payments across categories for the masses. In the month of June 2022, BBPS processed over 8.21 crore transactions worth ₹ 15.15 thousand crore. Other digital payments ecosystem instruments like FASTag and the National Common Mobility Card have allowed digitisation of payments at toll gates on highways and on public transport respectively. The toll collection through FASTag stood over ₹ 38 thousand crore for the financial year 2022.
Replicating India’s payment solutions
Powered by such a diverse and technologically advanced payment ecosystem, India accounted for the highest volume of real-time payments around the world, with over 40% of all such payments made through 2021 originating in the country. The uniqueness and diversity of India’s payments ecosystem instruments make them suitable for ready adoption to meet the diverse payment needs of countries around the world. With the launch of IndiaStack.global this week, India has committed to sharing its digital experience with the world. This has set the stage for India’s payments solutions getting replicated across the world.
[Note: Author comes with 20 years of business experience across payments, telecom, credit cards, retail, and the advertising sector. Prior to joining NPCI, he has worked with entities like Bharti Airtel, Vodafone, ICICI Bank, Kotak Mahindra Bank, and Samsung Electronics among others.]
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