Digital Payments Industry In India

After the demonetization period, the tale of India’s digital payment story is all new and exciting also as it has moved to a cashless economy from an economy that was cash-obsessed. The main reason behind the potential growth of India’s digital payment is mainly because of the heavy usage of mobile internet and also because of progressive regulatory policies. In the coming years, we will surely find out how this digital payment sector has paved a new definition for the Indian economy.

1. The growth of digital payment industries:

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The growth of e-commerce companies, which led a path to create much more digital wallet companies, has aided in the increased progression of digital payments. And more to add to this fact, these digital wallet companies bring out attractive offers such as cashback, lucky draws and many more to encash a more significant number of customers in a small amount of time. This step of them is commendable as it has aided in increasing the whole customer base into a new level and has also increased the currency flowing through the digital payment sector.

The leading cause for the favorable outcome of digital markets is also because of the extensive usage of smartphones in our country, which help to transfer the amount through the digital wallets easily and quickly. And moreover, even consumers love this idea of moving money digitally as it eases out the work for them and in return, they can save their money courtesy, these cashbacks.

2. The reasons which helped in the growth of digital payment industries:

What’s more surprising is that the digital payments sector in India is predicted to constitute around 10 percent of the whole global payments sector in the following number of years. But what was the main wheel which helped in pushing this digital payment market forward? It was the Government of India’s Cashless India initiative which was launched under the Digital India Campaign helped in the birth of this payments market.

The government has also been further boosting the usage of many digital payment methods such as banking cards, Unstructured Supplementary Service Data (USSD), mobile or digital wallets, internet banking, mobile banking, Aadhaar-enabled Payment Services (AEPS) and micro ATMs primarily to convert the country from cash dependant society to a cashless society. The government is also bringing up many initiatives like getting film stars for ad-campaigns, fliers, newspapers ad to engross the public into accepting these digital payment sectors as their mode of transaction most of the times. This effort from the government will also help in enlarging the landscape of digital payments market in our country.

Moreover, these digital wallets are available at all shopping malls, supermarkets, grocery stores, restaurants, and petrol stations. This step initiated by the digital payment companies has also helped them extend they’re among the customers and has encouraged them to use them for even offline transactions. But how does this help the digital payment sector? If both online and offline sales are made using digital wallets, then the total outflow of cash digitally will increase, and this will also boost the level of the economy. From all these steps initiated, one can clearly state that these digital wallets have become a significant contributor in steering the digital payment sector to a new level.

3. The main trends of the digital payment sector:

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The patterns of the digital payment sector are differentiated into three full categories, which are the initiatives took by the government, the rise of digitalization and innovation and lastly the increased multiplication of smartphones. The efforts put forward by the government has helped to invigorate a cashless society, and these initiatives have also played a major in converting this digital payment sector thoroughly.

The government also has plans and has aimed to make the country paperless and faceless. Due to this controlled and commendable approach of the government, it has put forward in bringing various innovation such as the mobile wallets and cash cards from the digital payment companies. Unified Payments Interface also referred to as UPI, which is launched by the National Payment Corporation of India, offers a simple way of transferring your money to your friends or other vendors with a single touch. This method also promises strong safety as it encloses a unique virtual address for every one of them and is adopted by most of the banks and vendors in the country. Bharat Interface for Money, also designated as BHIM is an extension of the UPI and USSD, has helped in enabling digital payments through the UPI address.

Because of this, new bank licenses and funded solutions or bankers are coming up with numerous ways of accepting digital payments through their customers. In this way, they are also assisting the customers in making affordable and a more natural way of making payments.

4. The dominant pillars of the digital payment sector:

dominant-pillars

But who are the most dominant pillars of this digital payment sector? Traveling agents. Yes, you heard it right. Online ticketing and travelling agents and even some event companies like Ibibo, MakeMyTrip, Trivago, Oyo, Redbus, Bookmyshow, Yatra, Airbnb and Indian railways which constitute of a higher user reach have also started to use the digital wallets as one of their mode of transactions which has in fact pulled the customers into online purchases. The online sales also appear to be a boon for the customers as booked tickets are directly sent through the mail instead of you waited at the counter, hours for the ticket.

The digital payment sector is slowly acquiring impetus nowadays and is also growing exponentially at a formidable rate. As per a report, nearly 81 percent of users prefer digital payment methods rather than the old conventional methods such as cheques or demand drafts often labeled as non-cash payment methods. Indian users are predominantly using digital payments for most of their essential day-to-day amenities such as paying shopping bills, utility bills such as electricity bills, mobile bills, water bills, and also for buying movie tickets.

The digital payments industry in India is expected to touch around $500 billion by the year 2020, according to a report by Boston Consulting Group and Google. The report also notes that this digital payment sector will also contribute around 15 percent to the country’s GDP.

5. The success behind the growth of digital payment industries:

The story of India’s digital payment has an interesting angle to it. The refreshing perspective is that most of the digital payments are dominated by microtransactions, which are money transfers less than 100 rupees. If you consider the Google-BCG report, then it states that more than 50 percent of a person-to-merchant transaction is always less than 100 Rs only. Furthermore, the digital payment sector is expected to grow enormously due to the introduction of digital payment appliances like UPI, digital wallets, Bharat QR which is also anticipated to double their contribution to around 30 percent in the coming future.

These digital or mobile wallets will predominantly lead to the growth of this digital payment sector. Mobile wallets are about to witness a compound annual growth rate of 148 percent over five years and are estimated to be around $4.4 billion by 2022 all following the Capgemini’s World Payment Report. It also states that digital wallets will soon outshine UPI within the next few years.

Many might be wondering what led to this rapid growth of the digital payments sector? Multiple factors are responsible for it. These factors may be classified as the growing smartphone usage in the country, the readiness of the customer in accepting digital payment transactions, it also includes the convenience offered by the digital payment sector while paying. Some other factors also have contributed to the success of digital payment banking, such as the rise of non-banking payment methods such as digital wallets and UPI and even the introduction of progressive regulatory policies.

6. Two factors responsible for the exponential growth rate of digital payment industries:

What has been most useful is the introduction of attractive offers, which acts as a catalyst along with the convenience to pay option. And guess what, these two factors have been the key in spearheading the growth of the digital payment sector in India. But you might be wondering which element has played the most significant role in uplifting the digital payment banking? It is the growing usage of the smartphone in our country.

As per reports, India has the third-largest internet user base in the world with around 300 million users. In this, approximately 50 percent of the users are connected with mobile-only, which registers about 150 million mobile users working on the internet, which is the reason smartphones factor is steering the digital payments bank.

Further, with the introduction of excellent payment systems like digital wallets and Bharat QR, the usage of digital payments has become more and more comfortable. If things go the same way, then it can be projected that by the year 2020, digital payments will easily supersede cash. This criterion is also correctly analyzed by the IDC Financial Insights report, which is titled as The Future of Payments in India: More Spectacular Growth Ahead.

Another prominent handler of digital payments is positive policy framework changes, and government initiatives like the initiation of new payments systems like – UPI, Aadhar linked electronic payments and improvement of the digital infrastructure.

7. The evolution of digital payment ecosystem:

digital-ecosystem

India has enclosed the most evolved ecosystem of digital payments when compared to the other 25 countries, and this survey was performed by FIS, which is a US-based banking technology company. And the shocking fact is that this survey included the UK. China and Japan. The parameters which were used by the company included the measure of digital payment services, adoption, immediate payment reactions, and 24-hour customer service.

And also according to the survey which categorizes the payment services offered in these countries on a scale of 1-5, which one is the lowest and 5 being the highest rating. Additionally, India was awarded the highest score in the survey, and it was the only country that managed to get a level 5/5 rating for its efficient digital payment sector. This achievement has made India leave countries like UK, Singapore, Denmark, Switzerland, China, Japan, and others behind. This shows the progression of the digital payment sector and its evolution in our country.

8. The main drawback experienced by digital marketing industries:

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But the main problem which can hinder the rate of digital payment is lack of innovation. Yes, change is happening, and it is one of the main reasons for the development of digital payments but is only in urban areas and layouts. The idea of digital payments has not been conceived in rural areas as good as the government has expected. In urban areas, most of the people have smartphones around, and it is quite easily accessible to the network.

But in rural areas both these things are not easily found. People might debate on the fact that urban areas to give us most of the income, but when coming to land coverage, most of the states in our country are primarily rural and underdeveloped. So a perfect way has to be scrutinized to get the digital payments sector going great guns even in rural areas.

Conclusion:

From all these proofs and statements, we can distinctly state that the digital payment sector is clearly transforming itself and is also witnessing stupendous growth.  Moreover, the innovations and regulations made in this sector have been praiseworthy in the last two years. This change has classified India as the most evolved country when it comes to digital payment ecosystems. With more support from the government and with more innovations to assure safety to customers, the digital payment sector is sure to rise into a new chapter in the Indian economy.

The extravagant use of digital payments has also ensured a safe and secure approach to dealing with your money. It has helped in increasing the mobility of the customers and has also enabled a data-driven solution for all your problems encountered under digital payments. These steps have ensured that India has adopted a sophisticated payment system. Lastly, the ever-increasing usage of smartphones and a lot of companies rolling out applications which support digital payments with easily accessible internet has made digital payment sector a wonder in our current state of economy.

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