Why India's digital payment ecosystem is a revolution

For an Indian resident in the year 2022, it has become extremely common to commence the day with a QR code scan and end it on the same. From your groceries to your travel, digital payments have entered your lives in full force. This is when you realise you are a part of the digital revolution, digital India.

According to a report by ACI Worldwide, the real-time transactions in India has skyrocketed to a whopping 48 billion, making it the global leader in this ecosystem.

But if we get to wish to get to the core of this number, what are the reasons that are accelerating this number?

Internet penetration

The effective combination of easy access to inexpensive internet as well as the penetration of smartphones have played a major role in facilitating this revolution. The digital revolution has supplemented increases in the application of financial services across the world, which gives the consumer to have better control over their finances in terms of borrowing, lending, tracking and saving.

Acceptance of UPI

UPI transactions have almost equalled to the credit card and debit card transactions. Stating some numbers in reference to the CLSA report, UPI transactions at $187 billion are close to surpass $83 billion debit card transactions and 102$ billion credit card transactions. UPI has changed the entire scenario of payment ecosystem, where people can transfer the smallest amounts in fraction of seconds without any hassle.

The wave of fintechs

As digital payments have impacted the payment ecosystem by a storm, the growth of digital lending stays parallel to the same.

Fintechs are becoming one of the major forces that are paving the way for financial inclusion in India. Strong ties with banks, financial partners and insurance players have transformed the entire process of loan procurement and disbursement.

Fintechs credit-based products and other EMI related products are acting as a perfect replacement for all real time transactions in the ecosystem. By skillfully analyzing their customers credit history and transaction data to provide loans on an approach governed by API’s, they offer a lot of speed and convenience

Consumers/Merchants say YES to digitization

The new to credit and subprime population has accepted this arrangement with open arms, as they are constantly looking for credit opportunities in the most hassle-free way.

The growth of digital lending is further accelerated by its acceptance by MSME’s, who were not able to secure loans from traditional banking systems. Time saving onboarding journey combined with digital KYCs have given these fintechs an exponential boost.

Role of the government

Whenever the chapter of “digital revolution’ opens in the Indian context, the role of the Government of India also needs to be significantly highlighted.

With its Digital India programme, the Government of India has accorded highest priority to the acceptance of digital payment ecosystem, where each and every segment of the country can benefit from the convenience of digital payments.

The norms on interest rates and liquidity regulations stretch a helping hand for fintech in serving its customers with ease.

A segregation made by the CLSA report is a testimony to the fact that digital payments are the future of the Indian economy. According to the report, close to 44 per cent of the payments will be accepted through payment gateways and aggregators, a rough 34 per cent through QR codes and the remaining percent through POS machines.

All these factors have led India to the number 1 spot in the whole world in terms of digital payments. The subcontinent has registered over 26 billion transactions in 2020-21, 60 % more than the market giant, China.

India is evolving at a speed which has never been witnessed before. A variety of factors have supplemented the growth of the digital wave. One of the major factors, is the growth and prominence of fintechs. The shape and form of loan disbursements have changed completely.

India’s digital payment revolution is an inspiration and case study for the entire world to witness. Customer convenience has taken a centre stage in the entire payment ecosystem and every player is pushing themselves to deliver the same.

So, if you search for growth stories of digital payments, the story of India comes at the top.

The author is Co-founder and CEO, Paytail. Views are personal.

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