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How has Digital Payment technology revolutionised the payments landscape in India?

It is the year 2012. A father & his little kid Tanay were on a routine evening walk in a garden. Suddenly kid saw a kulfi vendor around. Tanay, as any other kid will normally do, adamantly demanded the kulfi from his father. The father was not carrying his wallet. So he reluctantly approached the kulfi vendor and requested him to sell the kulfi on credit. The vendor suggested the father make the payment using Paytm, one of the pioneers of using digital payment technology in India. Father, surprised by kulfi-vendor having Paytm access happily did that. Everyone – the kid, his father and the kulfi vendor ended up happier.

Over the last few years (before 2020), while digital footprints were seen and infrastructure was strengthened, the COVID pandemic (from 2020-21) made sure people compulsorily adopted digital payments and paved the way for the country to become a true digital payments economy. There are millions of such stories where mobile has replaced the need for cash. The trend got accelerated with the UPI railroad and exacerbated post-demonetisation and the Covid pandemic. Now there’s a clear preference of consumers to make payments digitally since it offers convenience, security, plenty of discount options and many other benefits.

This is evident from an ACI Worldwide Report which says, at 48 billion India accounts for the largest real-time transactions in the world in the year 2021 mostly enabled by increasing acceptance of UPI-based or QR-code-based payments. This is three times that of the next ranked China which accounts for 18 billion transactions. Further, a Survey conducted by Mastercard suggests Indian consumers are most willing to use Digital payments in the Asia Pacific with about a 93% adoption rate.

What is Digital Payment Technology?

The technology that enables the transfer of money from one account to another using mobile wallet, UPI, QR codes etc. It was made popular by mobile payment apps such as Paytm, GPay, PhonePe, BHIM etc.

Some of the types of Digital Payments are as under:

  • Unified Payment Interface (UPI)

  • Immediate Payments Service (IMPS)

  • Debit/Credit Cards

  • Mobile Wallets

  • Digital Rupee (a recent introduction by RBI)


Benefits of Digital Payments

For consumers:

  • Security: No need to carry large cash so no worry about pickpockets, misplacing or losing cash. This typically used to happen during train/bus journeys or at crowded places like railway stations, bus stands, or religious places and events.

  • Convenience:

    1. No need to worry about keeping change since digital payments are possible for the smallest of denominations

    2. No need to give large cash to kids since parents can make required payments remotely even when they are not around the kids

    3. Reduced need for visiting Banks or ATMs

    4. Lesser need for chequebooks

    5. Better tracking of all expenses

  • Safety: Touch-less transactions during the Covid pandemic saved consumers from mental stress

Online purchase of goods or services is the new normal since it avoids unnecessary traffic hassles

From businesses:

  • The technology allowed all kinds of vendors, big or small to accept digital payments.

  • No need to worry about keeping currency coins or loose change in your pockets.

  • Better reconciliation of accounting books.

  • Payment is directly reflected in the bank account. So no hassle of stocking money and depositing it to the bank periodically.

  • Minimum effect on sales even during the pandemic time

  • Businesses are increasingly going online

For Government:

From the government’s perspective, digital transactions are Aadhar-linked and hence more transparent than cash transactions. Transparent transactions boosted the government’s tax revenues as well as reduced space for the black economy. Further, it allowed the government to manage the lockdown effectively since the consumer was not needed to go out for buying essential grocery items.

Conclusion

For Tanay and his generation’s kids, digital payment is the norm. He is not going to use Cash as much as his father used to use for sure. Further, he will shop from the best in the world and not necessarily from the nearest in the city. The use of cash is on the wane and businesses including mom-and-pop stores, grocery sellers, and daily wage earners, will have to increasingly adopt digital payment options if they have to survive the shift in consumer preferences.


Tanay Patni

Grade IX Student

(by invitation)

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