Digital Payment In India

Digital Payment In India

• The Union Government has set aside 2,600 crores as an incentive for banks to promote digital payments.

About UPI:

• The Unified Payments Interface (UPI) provides a simple way to move money from one bank account to another. It has grown in popularity since its debut in 2016.
• UPI now accounts for more than 40% of all retail digital payments (non-cash and non-paper payments) in India.
• The National Payments Corporation of India (NPCI) operates the UPI, which was established in 2016. It's a solution that integrates various bank accounts into a single mobile app. The Reserve Bank of India (RBI) and the Indian Banks' Association (IBA) established the NPCI in 2009 with the purpose of developing a strong payment and settlement infrastructure.
• Covid-19 Impact: During Covid-19, digital payments facilitated the operation of enterprises, even tiny merchants, and aided in the maintenance of social distance.
• Growth in Digital Transactions: As a result of a previous incentive plan for digital payments implemented in the previous fiscal year, total digital payments transactions increased by 59% year on year, rising from Rs 5,554 crores in FY 2020-21 to Rs 8,840 crore in FY 2021-22.

What are the state of UPI and digital transactions right now?

According to the 'Prime Time For Real Time 2022' research, India's real-time payments comprise the Immediate Payment Service (IMPS) and the Unified Payments Interface (UPI). Both have witnessed an upsurge in usage in recent years.

• In 2021, India had the most number of real-time transactions (48.6 billion). China had the second-largest number of transactions (18 billion transactions). As a result, transactions in India were 2.7 times those in China.
• When compared to other nations, the size is even more striking; for example, the number of transactions in India was about seven times more than the total real-time payments volume of the world's leading economies: the United States, Canada, the United Kingdom, France, and Germany (7.5 billion).

The Importance of Digital Payments:

• There are no Merchant Discount Rate (MDR) fees for merchants on card-based transactions. This encourages merchants to accept UPI payments.
• The UPI is supported by a rich ecosystem that allows for seamless and quick fund transfers. This includes the availability of high-speed internet in many regions of the country, smartphone-powered technology, cloud computing, and modern software engineering technologies that complete a transaction in a matter of seconds.
• Friendly to the user: It will offer cost-effective and user-friendly digital payment solutions. It will provide consumers with cheap payment choices that are accessible at any time and from any location.
• It will lessen the pressure on banking networks for modest transactions.
• It will allow payments via older feature phones.
• Digital society: It is a path toward a less-cash and less-card society that will allow the country to progressively develop its digital payments.
• Leader of the world: This will cement India's status as the global leader in digital payments.

Problems and difficulties:

• Geopolitical hazards: In light of rising geopolitical dangers, the text also discusses ring-fencing domestic payment networks, particularly the necessity to compel domestic processing of payment transactions.
• Frauds: As more people use digital payment methods, there will be an increase in digital payment fraud.
• Domestic payment data storage: Banks and non-bank PSOs are permitted to process payment transactions abroad under specific conditions.

Way Forward

• India is the poster child for real-time payments, demonstrating how a concerted, collaborative, nationwide effort can unlock enormous economic and social possibilities. Keeping this in mind, UPI's reach and acceptance must be expanded further in order to generate additional economic potential.
• The Indian digital payment ecosystem has been revolutionized, and India has emerged as a pioneer in the creation of digital assets that can serve as a model for many other countries.
• The Indian government must make greater efforts to assist India to become one of the world's most efficient payment markets.