Over 6 years on from the “Demonetisation” announcement by PM Narendra Modi, the Indian payments landscape has witnessed a tectonic shift. The purpose of the initiative was to reduce counterfeit cash used to fund criminal activities and create a cashless economy, backed by the Reserve bank of India.
In the short run though, it didn’t quite pan out the way they hoped. Currency in Circulation (CIC) actually returned to linear year-on-year growth soon after things settled down. Cash was still king, used across the spectrum of transactions. Real estate purchases still involved cash & Indians felt most comfortable using cash for minor transactions like personal services, travel, home repairs, domestic staff salaries & more.
Simultaneously, the Unified Payments Interface (UPI) was taking shape & seeking to establish its place as the leading instant payments solution. But it wasn’t quite there to make an impact yet.
All that changed when the COVID-19 pandemic hit & everyone was forced to resort to other means of transacting on a daily basis. The pandemic fueled the adoption of digital payment methods as immediate health concerns naturally took precedence. This spurred the rapid establishment of an increasingly available acceptance infrastructure.
The Indian Government facilitated the same through several measures, making smartphones and internet more prevalent than ever & enabling financial transactions to be carried out through Aadhaar linked bank accounts. These steps supplemented the Jan Dhan Yojana exceptionally, a financial inclusion move introduced in 2014 to expand affordable access to financial services such as bank accounts, remittances, credit, insurance and pensions.
Now that the circumstances favoured it, the UPI became the primary catalyst in India’s transition to a digital economy. Big Tech companies scaled the implementation of UPI to a population scale leading to an increased usage of QR codes and UPI in rural areas too. The RBI is now evaluating a modified policy for the charges on UPI, IMPS (Immediate Payment Service), NEFT (National Electronic Funds Transfer), RTGS (Real-Time Gross Settlement), debit cards, credit cards, and prepaid instruments, to boost the efficiency, growth and acceptance of digital payments systems.
Mastercard’s second annual New Payments Index (NPI) survey involved 35,040 respondents in 40 markets across five regions, including 7,004 in the seven nations in the Asia Pacific region. These seven are: India, Australia, China, Japan, New Zealand, Thailand and Vietnam.
According to the survey, Indians are the most willing in the Asia Pacific region to embrace digital payment methods. About 96 per cent are likely to use a digital payment method in the next year. A staggering 93 percent Indians have used digital payments in the last year, the highest in the Asia Pacific region, and over 50 per cent of these involved QR codes or digital money transfer apps.
Digital payments for online marketplace purchases tops the list at 56 per cent. About 48 per cent of respondents claimed to have made a mobile app purchase, while about 55 per cent said they have used a payment method exclusive to a particular business, such as loyalty points or store credits, the survey said.
Now, the critical element that kept Indians from making the switch quicker was a lack of awareness & sufficient information. Security concerns haunted the masses due to insufficient knowledge of the system. They were only ever aware of debit & credit cards as a means of digital payment and found them to be reasonably secure, persisting the scepticism around Quick Response (QR) codes.
As the technology progressed along with our understanding of the same, the tides turned. The convenience & security that all digital payment methods deliver, especially UPI & QR Codes, is novel and undeniable. It truly is a unifying means of transacting and bolsters the advancement of the entire nation. A crude indicator of the same is retailers on the ground, encouraging digital payments as opposed to cash in today’s India.
As a conclusion of sorts, here are some insights from the aforementioned survey on the contemporary opinion of our population on digital payments, “Security has been cited as the most important factor behind using QR Code as a digital payment method over other methods, such as cards. Consumers perceive it to be as secure as traditional payment methods, such as cash.”
S Anand is the CEO and Co-Founder of PaySprint.