Explained - With big push and support from Modi government, how digital payments are flourishing in India

Right from the time PM Narendra Modi came to power at the Centre after securing a landslide victory in 2014 Lok Sabha Elections, there has been a huge emphasis on 'Digital India' movement. It's a highly-ambitious project of Modi government and even in Modi 2.0, the government is leaving no stone unturned to make India truly a digital country. Moreover, it goes without saying that when we talk about the Digital India project, payments and transactions process happening over digital platforms is the backbone of the movement. 

Key factors for Indian digital payments ecosystem

Also, customer’s convenience and accessibility are the key factors that are propelling the Indian digital payments ecosystem. Over the last 2-3 years, new digital technologies have been developed by many of the FinTech companies and start-ups, which have given consumers a plethora of choices when it comes to selecting payment modes and products that they may use. Now, payment platforms are emerging swiftly with a number of common offerings for the end-user like accessibility, data, instant payments, interoperability, advanced technology, innovation and smooth transactional experience.

Upsurge of innovative payments ecosystem in India

Amidst the upsurge of innovative payments ecosystem in India, a new category of non-banking payment and transaction providers are coming to existence. The advent of e-commerce, advanced telecom functions and digitization has provided an additional thrust to the financial services and payment industry in India.

As the number of transactions in non-cash payment modes is accelerating, the power dynamics of the payments industry is also shifting gears. Now, omnichannel providers and non-banking digital payments service providers are having the bigger bite of the pie. The competitive landscape will also gradually alter as many companies will pursue collaborations to grow and scale up.

Moreover, to further boost adoption and to address user grievances, recently RBI has provided for an internal ombudsman for large non-bank Prepaid Payment Instruments (PPIs) with more than 1 crore customers in India, which will benefit those who experience digital frauds or payment failures. This will get the pressure off the cumbersome procedures and promote hassle-free transactions.  

To further fortify the acceptance of digital payments in India, it is also imperative to increase merchant involvement and empowerment. Without sufficient incentives and benefits for the merchants of large or small businesses, digital payments will not be able to flourish and limited to the urban areas. Expensive payment acceptance scenario and inertia towards cash payments has dissuaded merchants and businessmen from adopting the digital modes of transactions. To truly achieve the goal of cashless India, it is necessary to ensure that the entire process runs both ways, where both consumers and merchants are benefitted.

Speaking on payments ecosystem in India, Sunil Khosla, Head Digital Business – Retail of India Transact Services Limited (ITSL) offering Ongo digital payment solutions said, "In order to fulfill an unprecedented rise in the demand for augmented user-friendly payment experiences, banks today have become the most proactive adopters of these exciting developments across functions. They are rapidly partnering, supporting, and promoting players in the fintech space and adopting newer software’s, programs, and integrated applications."

"One of the biggest business and consumer transformations after telecom in India is the Digital Payment Transformation that started almost 3 years ago. This is encompassing all forms of business ecosystem both B2B & B2C, but the real beneficiaries are the end consumers. Digital Payment is not only empowering the consumer with more options but also aiding in speed, digital recordkeeping & tech savviness. It is no more an urban phenomenon but has been rapidly spreading to Tier 2, tier 3 & rural markets," he adds.

"The consumers are benefiting with new age Banking, Direct benefit transfers, Ecommerce platforms, transportation apps, various payment options for merchant payments, bill payments, faster utility payments, Loyalty programs & Rewards, access to lending etc. The user-friendly experience along with faster consumer grievance redressal & the self-motivated drive from millions of millennials is ensuring that Digital Payments is becoming one of the major drivers towards India becoming a 5 trillion economy soon," he further added.

"The Government’s push via the “Digital India” initiative & with an immediate target of 300 million Digital Payment consumers over the next few years, India is surely aiming to become the biggest global hub for digital payments," Khosla concluded.

Commenting on digital payments in India, Byas Nambisan, CEO, Ezetap said, "Fintech companies today cater to the length and breadth of the country – and you would be surprised to see that, like how I was surprised to see a card payment being done to pay an electricity bill at a village in Mizoram. But according to me, the real and robust measure of how effective this is, is in how it is used in our mundane use cases – be it scanning a QR code to pay 10 bucks at a tea shop or using your debit card to paying tax in villages or paying your highway toll using your mobile wallet. This shows the real impact of how the mass of Indian citizenry is engaging in more digital transactions. This shows that people are more comfortable than ever in using and trusting digital modes of payments for their everyday needs. The benefits of digital payments also stem from digitisation."

"The Indian Government has made measures to make citizen IDs available online. This directly helps citizens to become a part of the financial grid – they have the capability to open their own bank accounts which give them immediate access to funds and credit. Even a person living far away from his bank can now make transactions online using the various digital apps available. Today's infrastructure also lets you pay anywhere digitally," Byas Nambisan added.

"Using digital payments not only make the lives of end customers easier by removing various layers of friction but also give them a wide variety of ways to spend it. For e.g., years ago, my gardener had to go door to door collecting his monthly wages. Now, with the help of digitization, he has a bank account and he can collect all his payments online – which also gives him a plethora of ways to spend his digital cash," Nambisan concluded.