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Digital Payments in India – Exploring the Growth Drivers
Digital Payments in India – Exploring the Growth Drivers

March 7, 2022

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Digital India, a campaign by the incumbent government has come a long way since it was initially launched in the year 2015. India has truly transformed over these years and digitised itself in a major way. Merchants in India are no longer reliant on a cash-only business model. Young and internet-savvy consumers are giving a major push to a wide array of digital payments in India.

Picture this: As per a PWC-ASSOCHAM study, India is expected to witness the fastest growth (CAGR of 20.2%) in digital payments’ transaction value between 2019 and 2023.

India’s merchants are now aware of the benefits of digital payments and as per a KPMG report titled ‘Fintech in India-Powering mobile payments’, from close to 1.5 million digital payment acceptance locations in 2016-17, the number of merchants accepting digital payments modes has increased to over 10 million, in a short span of two to three years.
 

Let us now explore some of the growth drivers of digital payments in India:

Rising consumer awareness – The usage of digital modes of payments by consumers has increased in recent times, especially after the 2016 demonetization and the COVID-19 pandemic. Consumers like the idea of being in charge of the digital payment process and that explains the growing fondness for contactless digital payments such as QR code payments.

Favorable policies – India’s vision to become a cashless economy could soon be a reality thanks to all the favorable policies coming from the government and the banking regulator to boost digital payments in India, be it the investment in strengthening the infrastructure or the technology side of things.

RBI’s May 2019 release of a vision document titled, “Payment and Settlement Systems in India: Vision 2019–2021” was a step in the right direction. This vision document highlighted 36 specific Action Points for turning India into a Cashless Economy. Announced in June 2020, the Payments Infrastructure Development Fund or PIDF by the RBI did subsidise the deployment of Points of Sale or PoS infrastructure (physical and digital modes) in Tier-3 to Tier-6 centres and north-eastern states in India. Subsequently, from August 26 last year, beneficiaries of PM Street Vendor’s AtmaNirbhar Nidhi in Tier-1 and 2 centres also started getting covered.

Smartphone proliferation and internet expansion – Rising smartphone proliferation and expansion of the internet infrastructure across the length and the breadth of India has helped in the country’s efforts to digitise at a rapid rate. As per some estimates, the number of smartphone users in India is expected to double to 859 million by 2022 from the 468 million users in 2017. India is also now the second largest internet user base in the world, as per Mary Meeker’s Internet Trends Report 2019.


These factors are indeed contributing to the growth of digital payments in India. Digital payments adoption in India is pointing north and technological improvements will further increase this adoption and bring India at pr with some of the most digitally advanced nations in the world.


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