The Indian economy is fast metamorphosing into a cashless one, bolstered by the power of Fintech players. A noteworthy phenomenon was witnessed in January 2020, with UPI clocking a record high of 1.3 billion monthly digital payments. Interestingly, this figure was a mere 0.1 million in October 2016. Consumers across different economic strata are switching to UPI, digital wallets, card payments, internet banking, and USSD payments. With this significant shift in consumer payment preferences, business owners liaise with payment aggregators or customized payment solutions providers. Be it a retail store POS system or an e-commerce payment gateway; holistic payment integration has become the norm today.
Factors that have ushered in the Digital Payments Revolution in India
To analyze new-age India’s vibrant digital payments infrastructure, it is important to understand the contributing factors. Here’s a look at the most important ones:-
- Comprehensive Government Policies– Over the last decade, the government has rolled out multiple initiatives promoting cashless transactions. The most prominent ones are the Digital India Campaign, Jan-Dhan Yojana, UPI, Aadhaar Pay, etc. The recent launch of the Digital Rupee has provided further impetus to these initiatives.
- Initiatives of RBI and NPCI- The Reserve Bank of India and the National Payments Corporation of India have been highly proactive in this regard. Owing to them, Fintech players can route seamless, hassle-free digital transactions via Aadhaar with utmost data security and fraud prevention.
- Role of Innovative Fintech Start-ups– Many top-notch payment aggregators, payment gateways, POS solution providers, digital wallets, and other NBFCs have reinvigorated the digital payments ecosystem.
- Increased Smartphone Usage and Cheaper Mobile Data- From a privileged few in metro cities to widespread use across two-tier/three-tier cities, towns, and villages, smartphones are all-prevailing. Cost-effective mobile data packs have equally contributed to increased smartphone usage, thus boosting mobile payments.
- The Covid-19 pandemic-induced transition to Contactless Services- The new norm of contact-free payments in the wake of the pandemic has further deterred consumers from paying cash. As a result, even local stores and vendors are accepting online payments.
- E-commerce and Online Services Boom- The e-commerce boom has run parallel with the popularisation of digital payments. The Covid-19 situation has also played a role in bolstering online purchases, thus necessitating merchant payment integration with suitable payment gateways.
Examining the Benefits of Cashless Transactions
The advantages of digital transactions are multi-faceted. Being such a diverse and populous nation, the ongoing transition from a cash-intensive to a cashless economy has been challenging. But since digital payments have a separate set of advantages for each entity, this collective progression has been smooth. Let us go through each one:-
- Benefits for Consumers
- Carrying cash or cards are no longer necessary. Your smartphone can facilitate all payments, be it for groceries, public transport, entertainment, or electricity and gas bills.
- Most digital wallets and popular UPI payment modes provide attractive discounts, offers, and cash-backs.
- You can keep a tab on your spending by viewing your mobile transactions history at a glance. Jotting down every cash transaction is a thing of the past.
- As long as the payment gateway is secure, you can be assured of secure payments. Provided you adhere to RBI-stipulated guidelines for digital payments, the chances of fraud are nil.
- Digital payments are fast and contact-free, keeping the current Covid-19 scenario in mind.
- Benefits for Merchants
- By providing a wide range of payment options, you can target a wider audience. You will lose out on prospects who don’t want to pay cash by accepting only cash payments.
- Seamless payment integration using the right payment gateway or POS enhances the customer checkout experience.
- With digital credit payment solutions integrated into your POS, you can entice loyal customers to spend more. Particularly during this pandemic wherein, the average spending capacity has been reduced, it will help in driving higher sales.
- The long and complex process of applying to banks for a merchant account is no longer required. Most payment solutions are easily available online and can be availed after a simple online registration process. The paperwork has been minimised, and business/financial documents can be uploaded on their website or app for KYC procedures.
- Funds are directly transferred to your account without getting held by any intermediary. Furthermore, all your business transactions are stored in the cloud so that you can cross-check them any time you want.
- Digital payment solutions are available as cost-effective, bundled packages for start-ups and SMEs. The setup and monthly charges are minimal and increase only when your business gains pace.
- The concept of printing and providing customers with paper bills and receipts have become outdated, thanks to digital payments.
- Benefits for the Society, Economy, and Government
- Digital payments enable transparency in funding various government schemes and initiatives. Beneficiaries directly receive funds in their accounts without mediators.
- Vulnerable sections of society can be empowered with inclusive financing and growth.
- Taxation systems have become more effective and compliant due to higher transparency.
- Business transactions are secure, fraud-proof, and traceable.
- Benefits for Start-ups
- Currently, the demand for efficient payment solution providers is at its zenith. Start-ups in the finance sector perform exceptionally well and have a bright future ahead. Given the vast Indian economy with both organised and unorganised sectors to cater to, the scope for innovation is massive.
The average Indian consumer today has developed an affinity for the online payment system. Not only does this include digital payments, but even credit-based payments like Credit/Debit Card EMI and Buy Now Pay Later. Simultaneously, business owners are realising the myriad benefits of accepting digital payments. It is indeed a win-win situation for both merchants and customers, making transactions easy, quick, safe, and fuss-free. As a result, a diverse range of Fintech start-ups are thriving and growing rapidly. With the advent of the digital rupee, the payments ecosystem is expected to become more robust in the foreseeable future.