India is truly changing… Digital payments are revolutionising the way Indians transact.
The World is moving towards a cashless economy and India is no exception, the government has been constantly pushing Indians to opt for alternate payment methods.
India, with hundreds of thousands of new users getting access to the internet each month, is a mobile-first country. This permits banks and financial institutions to provide net-banking and mobile-banking services to all the customers.
As per reports, the finance minister, during the Union Budget 2019-20, had stated that 2% tax deducted at source will be levied on cash withdrawals that exceed Rs.1 crore in a year from the bank account. This is to discourage the practice of making business payments through cash transactions.
One of the largest stimulators of cashless transactions was Demonetization.
On November 8, 2016, India went through demonetization by abolishing high-value currency overnight. This move gave an unanticipated fillip to a cashless Indian economy.
It nudged the cash-dependent Indians to go digital in unprecedented ways. For instance, Paytm reportedly witnessed a surge in overall traffic (700% increase), the value of money added to Paytm accounts (1000%) touching a record 5 million transactions a day.
After demonetization, even traditional banks had begun to incentivize customers to make payments digitally from their own bank accounts. As the natural step forward from here, other players have begun to promote cashless transactions for individuals and businesses alike.
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The Covid-19 pandemic has fueled a massive shift towards digital transactions in India. The government’s vision got a big boost in the field of monetary transactions with the demonetization move four years ago. Since then, there has been a marked increase in tools and solutions available in the e-payments sectors.
The Indian consumer has the choice of e-wallets, United Payments Interface (UPI) systems, Unstructured Supplementary Service Data (USSD) services, and more, to transact financially online.
In fact, according to the National Payments Corporation of India (NPCI) data, payments on UPI in June 2020 hit an all-time high of 1.34 billion in terms of volume with transactions worth nearly Rs 2.62 lakh crore.
MobiKwik, an online UPI application acquired around six million, new users, during the lockdown in April and May.
Fueled by lockdown, the overall banknotes printing volume has reduced by 13% and the money circulation has declined by 23.3%.
Reports indicate that many FinTech companies are emerging in India like brokers, Neo banks, wallets, and so on. These companies are reportedly seen working with small businesses like grocery stores. In this model, the owners can send UPI links and the customers can opt for deliveries with an online payment structure in place.
Payment innovations, alliances, and partnerships like these will enable the larger ecosystem while helping to respond to new challenges.
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India reportedly has the most advanced real-time payments system globally, and pre-pandemic numbers reflect the exponential growth.
ACI’s global report, “Prime Time for Real-Time,” indicates that real-time payments in India will grow at 23.4% annually for the next five years as it seeks to lead the world in overall real-time payments volumes. At the same time, transaction volume is set to grow from 15.3 billion (present-day) to 52.8 billion.
Government initiatives coupled with the emerging payment instruments such as UPI, prepaid cards, NCMC mobility cards, BharatQR code, FASTag, and so on, the users are looking to adopt convenient alternatives for paying digitally.
Although consumer spending across industries such as travel, fuel, retail, and entertainment took a hit in the last two years. Everyone moved towards a precautionary lifestyle – given the government’s call to stay indoors, which led to a digital push. This has led many first-timers and novice internet users to embrace digital payments.
India is just a few years away from being a Digital Nation!