Digital Payment Landscape In India 2017: Trends & Future

From cash to digital payments, the story of India is really exciting. Primarily being a cash-obsessed economy, now India is on its way of becoming “Cashless Economy”. Because of the implementation of several policies and increased use of the internet and mobile, Indian Digital Payment System is going through a transformational phase. This push to become a “Digital India” showed tremendous growth in digital transactions from 2017 until now. The “Digital India” initiative of our Prime Minister “Narendra Modi” has acted as a key motivation behind this change. 

cashless economy

Digital Payment Sector has experienced an unexpected jump in its growth from 2017. When the government announced the demonetization of high currency, digital wallets had shown a growth of total US$2.8 billion i.e. Rs 191 Crore. These multiple factors have altogether shaped India’s Payment Landscape in favor of digital payment cashless economy and hence, Digital India. 

Now, most of you may wonder, what we meant by Digital Payment? So, Digital Payment refers to electronic transactions or payment made over internet and mobile payments via smartphones applications cashless economy. 

Digital Payment System- Then, Now & Future

With so many factors forcing, the Digital Payment in India has come a long way. In recent years, our country welcomed many changes and this has resulted in a stupendous advancement in the payment system. The fintech (Financial Technology) adoption in the last few years has resulted in a significant boost in this sector. From 2017, India has registered robust growth in both the volume and value of digital payments.

With the growth of e-commerce and digital wallet companies back in 2017, just after the announcement of monetization, they started offering lucrative offers and cashback’s. This made their way to customers phone as well as pockets. From micro transactions to using them for offline point of sale like shopping malls, restaurants, petrol pumps etc; the digital payment system is now expecting to touch approx $500 billion by 2020.

After so much of struggle, India is now one amongst the largest market opportunities for digital payments. In today’s scenario, approximately 88% of Indian population is preferring cashless transactions. From this percent of the population, it is noted that 48% are using the digital payment methods for more than 75% of their total transactions cashless economy.  

Digital Payment Trends

As a part of this dramatic shift in the payment system, payment services and products are also created. These services and products are used with trends reshaping the whole structure of the payment ecosystem. 

  • Cashless Payments- India Becoming A Digital World

The growth in digital payment sector is driven by multiple factors. The ever-growing use of smartphones, a convenient method of payment and availability of profitable offers, are key factors which are proving to be a boon for Digital India. 

In order to make these payments more user-friendly and widely reachable, the government is declining the transaction fees

  • Promising Safer Payments

cashless economy Due to the continuous change in digital payment gateways, Government regulations are keeping pace with the changing environment. They have taken a few regulatory steps that are assisting digital payments.

They are as follows:

  1. KYC for transactions
  2. Two-factor authentication (2FA)
  3. Aadhar making KYC easier
  4. Unified Payments Interface (UPI)
  5. Bharat Bill Payment System (BBPS)
  • Promising Safer Payments

Due to the continuous change in digital payment gateways, Government regulations are keeping pace with the changing environment. They have taken a few regulatory steps that are assisting digital payments. They are as follows:

  1. KYC for transactions
  2. Two-factor authentication (2FA)
  3. Aadhar making KYC easier
  4. Unified Payments Interface (UPI)
  5. Bharat Bill Payment System (BBPS)
  • Hike in Service Providers

India has been witnessing a considerable change in digital payments in past 3-4 years. With the growing use of digital payment gateways, cashless economy service providers are also growing rapidly. Today our digital landscape involves telecom, banks, mobile wallets, and much more. Also, we can easily predict that technology and payment products will keep on increasing in the near future too.  

  • Escalating Customer Experience

The convenience and user-friendly interface of the digital payment system is enhancing the customer’s experience. With the loftier experience using digital payment methods, now you may get access to bank account apps combined with rewards, accuracy, and offers.

Digital Payment Landscape In India

The phenomenal decline in cash transactions has subsequently gave a way to non-cash transactions. This shift from cash payment to digital payment, the growth in total retail payments has increased by 3x (three times) in the last five years. With the growth in cashless economy system, the methods of paying online are also increasing. Not just cash payments, but modes of digital payments has also undergone a major change.

1. Online Ticketing Companies

In the segment of digital payment transformation, Online Ticketing Companies plays a significant role in pushing Indian users to know and get familiar with online transactions for routine services. They include transportation bookings, event booking, payments of utility bills and much more. 

2. E-commerce Companies

After Online Ticketing Companies, another support hand in growing digital awareness are E-commerce Companies. They have completely changed the structure of digital transactions in India. With the evolution of shopping websites or food delivery apps combined with high discounts, the digital payment system has experienced a drastic change. 

3. Offline Payment wallets

With the outburst of smartphone usage, many mobile wallet companies tried to enter this sector. Some ruling mobile wallet companies to include Paytm, Mobikwik, Oxigen wallet, Citrus, Freecharge, and PayUMoney. Today they shift their focus to the expansion of the offline world. With their various offers, they are attracting customers to use mobile wallets.

4. Unified Payments Interface (UPI)

In 2017, we saw a shift from card payments to wallets, UPI (Unified Payments Interface), and Aadhaar Enabled Payment System. Among all these, UPI has come forward as a game-changer.  UPI is a big accomplishment for RBI. UPI simplifies and unifies online money transactions. It allows transaction between two bank accounts using an app. This attracts the customers to go for it. 

Future of Digital Payment System in India

India is all set to escalate its digital payments in the near future. By looking at the speed by which 2019 is going, we can foresee our digital transactions to increase to 70% CAGR (Compound Annual Growth Rate) by 2020. 

The development of new apps eases the transfer of funds across the country. Following are the future expectations of the digital payment system in India. 

  • Artificial Intelligence (AI) will result in more convenience and security in Indian Digital system.
  • Increase in the mobile device will increase the volume of digital transactions.
  • 50% of internet users will begin to use digital payment methods. 
  • Merchants acceptance network will move forward by 10 times.
  • Technology will make transactions easier and much higher.

End Of The Discussion

In the era of rising fintech, it is believed that India will show a record-breaking number of digital transactions in the coming years. Due to multiple factors and several institutional and behavioural trends, we can see India’s transition towards a less-cash economy.    

People have now started using more digital payment methods and are relying lesser and lesser on cash. Demonetization let people to register themselves on various digital payment and hence, it proved to shape India’s payments landscape in favor of digital solutions.

Clearly, Digital Payment sector witnessed massive growth, innovation and regulation over the last two years.

Now, the focus is to keep this momentum on with more support of public and government.