The Indian economy continues to be heavily reliant on cash

Digital payment systems are heavily reliant on smartphones that are enabled with data
connections, NFC, Bluetooth etc.

The solutions available now are catering to individuals who are already well versed with cashless
transactions through credit/debit cards and net banking

Post the implementation of demonetisation in November 2016, the use of digital payment
methods in India received a major boost. According to the National Payments Corporation of
India (NPCI), the value of the BHIM Unified Payments Interface (UPI) transactions skyrocketed
to INR 1 Tn while the volume of transactions reached 913 Mn, up from a meagre 7 Mn in April
2017.

One would imagine that this massive growth of digital payment methods would consequently
lead to a decrease in the use of cash. However, in spite of all this, the cash in circulation as
of June 22, 2018, was only 9.8% more than it was on June 23 in 2017. This indicates that
even though there is a greater appetite for digital payments systems, the Indian economy
continues to be heavily reliant on cash.

Need For Low Cost, Interoperable Infrastructure

This continued dependence on cash persists due to certain challenges deeply rooted in the digital
payments ecosystem in India. These ingrained issues can be largely attributed to a lack of
adequate infrastructure. In the current scenario, digital payment systems are heavily reliant on
smartphones that are enabled with data connections, NFC, Bluetooth etc. Out of India’s 800
Mn mobile phone users, only 200 Mn use smartphones. Of these phones, only 6 Mn are NFC-
enabled.

An even smaller percentage of users has access to QR code mechanisms. This translates to
approximately 85% Indians who do not have access to the infrastructure required to adopt
the current digital payment systems that are heavily reliant on smartphones. There is a dire
need, therefore, for a more interoperable and universal method of digital payments in the
country.

Post the abrupt implementation of Demonetization, the use of digital payment methods in India
received a major boost. According to the National Payments Corporation of India (NPCI), BHIM
Unified Payments Interface (UPI) transactions touched INR 1 trillion in value and 913 million in
volume, up from a paltry 7 million volume in April 2017. One would imagine, then, that the
increased use of digital payment methods has led to a decrease in the use of cash.

However, this isn’t the case. According to data from the RBI, the total currency in circulation
stood at INR 18.13 trillion on March 9, 2018 which was significantly higher than the INR 17.97
trillion on November 8. Simply put, cash as a payment instrument is still dominating the
payment space, and digital payment usage is still limited to a small, largely urban and
technologically enabled audience. Delving deeper into the payment practices and infrastructures
in the country, one can clearly see that there is an overall technological disconnect that is
ensuring that cash remains king.

Benefits-

But why should that matter? In the discussion that followed the implementation of
demonetisation, the government said that encouraging digital payments was one of the
motivations behind the policy. The government built better digital infrastructure and promoted
the penetration of mobile wallets along with secure Aadhaar-linked payment systems to provide
a seamless payment process. Why should Indians be encouraged to adopt digital payment
systems? It did so because digital payment systems are easier to regulate and monitor, allowing
the government to better prevent fraud, money hoarding, and tax evasion.

End-consumers also benefit in getting rid of their reliance on cash. By adopting cashless
methods, people do away with need to carry around bulky banknotes or plastic cards. What’s
more amazing is that they do not even need to be physically present while making payments!
Extreme convenience has indubitably appeared as the foremost benefit of digital payment
methods. These payment methods are also more reliable than cash transactions as all digitally
carried out transactions are duly recorded and these records can accessed to be used as proof of
payment. By allowing people to track spends, digital payment methods not only help while
budgeting but also while calculating income tax payments. If under scrutiny, these records can
help people explain their savings and spends.

Digital methods of payment also offer security by doing away with predicaments such as lost
cash or misplaced cards. Security measures such as biometric IDs and two-factor authentication
give customers a sense of safety while using these methods. Minor cash glitches such lack of
exact change with shopkeepers can also be permanently resolved with the advent of digital
payments where you can pay the exact amount to the very last Paisa.

However, even with the aforementioned advantages in place, cash is still the most predominant
method of payment in India. For all their benefits, digital payments have continued to be elusive
and inaccessible for a substantial majority of Indians.

Drawbacks-

Even though payments through digital methods such as wallets and UPI are convenient, they
remain inherently exclusionary as they are majorly based on internet connections, QR codes,
RFID and similar hardware and software that is complex to operate and expensive to own.

According to available industry figures, India is home to 800 million mobile phone users, of
which only around 200 million use smartphones, leaving 600 million cellphone users without the
ability to use the internet or QR codes for payment. Of these, a mere 6 million phones are NFC-
enabled. The fact that all sections of society do not have access to pre-existing digital payment
methods acts as a huge disconnect in the digital payments landscape. Owing to this gaping chasm
in the digital payment system, a lot of people have been unable to adopt these otherwise cutting-
edge methods of payment.
Further, even after putting complex security procedures in place, digital wallet scams are
common due to a lack of familiarity with these digital systems, and Indians are thereby reluctant
to completely trust these methods. With security concerns on the rise, the need for a more
reliable system of payment is apparent.

To create a high-functioning, productive cashless economy, there exists a need for a method that
is as interoperable as cash and as convenient as cashless methods.

Sound-Wave technology to fill digital payment gaps

Soundwave-based payment systems can bridge the gaps that currently exist in the digital
payment world. Soundwave technology merges the advantages of digital methods and those of
cash to create a uniquely interoperable payment system. Such a system does not rely on complex
hardware similar to pre-existing methods. In fact, it can be integrated with basic phones that do
not support data connections.

Sound-based payment services, use sound waves to enable payments on any device, independent
of the instrument or infrastructure, providing the interoperability of cash along with the ease-of-
use of digital payment systems. It thus enables contactless payments and communication
between mobile phones, leading to convenient transactions with no added costs or high initial
expenditure for the consumer or merchant.

Addressing the need for added security, new-age sound-based proximity communications and
payment service companies have integrated Blockchain to create a secure and accessible
payment system.

Soundwave technology, with its maximum convenience and seamless interoperability, can
slowly but surely, take over the use of cash in India. When everyone from a huge retail store
manager to a local mom-and-pop store owner, pay using sound-wave technology, India will truly
become a trailblazing, cashless economy.

National Payments Corporation of India (NPCI)

1. NPCI is the umbrella organisation for all retail payment systems in India which aims to allow all
Indian citizens to have unrestricted access to e-payment services.
2. Founded in 2008, NPCI is a not-for-profit organisation registered under section 8 of the
Companies Act 2013.
3. The organisation is owned by a consortium of major banks, and has been promoted by the
country’s central bank, the Reserve Bank of India.
4. Its recent work of developing Unified Payments Interface aims to move India to a cashless
society with only digital transactions.
5. It has successfully completed the development of a domestic card payment network called
RuPay, reducing the dependency on international card schemes.
6. The RuPay card is now accepted at all the ATMs, Point-of-Sale terminals and most of the online
merchants in the country.
 7. UPI is a path breaking innovation that is unprecedented globally. Its high volume, low cost and
highly scalable architecture built on an open source platform is key to India’s transformation to
a digital payment economy.
8. The first version of UPI was launched on April 11, 2016 and in the last two years the platform
has emerged as a popular choice among users for sending and receiving money.
9.

Loss: Now officially acknowledged

 India’s 263 million farmers live mostly in the cash economy and millions of them were
unable to get enough cash to buy seeds and fertilizers for their winter crops.
 The report said that demonetization came at a time when farmers were engaged in either
selling their Kharif crops or sowing the Rabi crops.
 Both these operations needed huge amounts of cash, which demonetization removed from
the market.
 Even bigger landlords faced a problem such as paying daily wages to the farmers and
purchasing agriculture needs for growing crops.

RBI to allow interoperability of payments

1. The Reserve Bank of India has released the guidelines for interoperability between
prepaid payment instruments (PPIs) such as wallets and cards.
2. This will effectively allow users of popular payment wallets such as Paytm, Freecharge,
Mobikwik, PhonePe and PayZapp to transfer money from one wallet to another.
3. These wallets could implement interoperability through the Unified Payment Interface
(UPI).

PPI’s to issue cards

1. The RBI has allowed PPIs to issue cards using authorised card networks such as
Mastercard, Visa or Rupay.
2. PPI issuers shall adhere to all the requirements of card networks/UPI, including
membership type and criteria, merchant on-boarding.
3. It has mandated for adherence to various standards, rules and regulations applicable to the
specific payment system such as technical requirements, certifications and audit
requirements, governance, etc.

Benefits of the move

1. The RBI guidelines while boosting the e-wallet segment, would also ensure the safety
and accuracy of the transfer of money by individuals from one wallet to another.
2. The transaction from one e-wallet app to another need to be speedy and accurate for the
interoperability to be effective and efficient.
 3. It is a progressive move for non-bank players and would lay the foundation to reach the
under-banked and unbanked segment with a powerful payment product.

What is Digital Payment

Digital payment is a way of payment which is made through digital modes. In digital payments,
payer and payee both use digital modes to send and receive money. It is also called electronic
payment. No hard cash is involved in digital payments. All the transactions in digital payments
are completed online. It is an instant and convenient way to make payments.

If we talk about cash payments, you have to first withdraw cash from your account. Then you
use this cash to pay at shops. Shopkeeper goes to the bank to deposit the cash which he got from
you. This process is time-consuming for you and also for the shopkeeper. But in digital
payments, the money transfers from your account to the shopkeeper’s account immediately. This
process is automatic and neither you nor the shopkeeper is required to visit the bank.

Digital payments save you from long queues of ATMs and banks. Because, if you pay digitally,
you won’t need to withdraw cash from your account. It also lots of time and a little bit money as
well.

Different Types of Digital Payments in 2019

From commonly used cards to newly launched UPI, digital payments has many types of
payment. Some modes meant for tech-savvies and some for less-technical persons. Below are the
different modes of digital payments.

UPI apps

UPI or unified payment interface is a payment mode which is used to make fund transfers
through the mobile app. You can transfer funds between two accounts using UPI apps. You will
have to register for mobile banking to use UPI apps. Currently, this service is only available for
android phone users. Hence you can use UPI only when you have an android phone.

You need to download a UPI app and create a VPA or UPI ID. There are too many good UPI
apps available such as BHIM, SBI UPI app, HDFC UPI app, iMobile, PhonePe app etc. It is not
mandatory to use the UPI app from your bank to enjoy UPI service. You can download and use
any UPI app.

UPI apps are a faster solution to send money using VPA or even IFSC and account number. But
they have some limitations also. If you do not have an android phone you cannot use UPI app, It
is not for you. Lack of stable internet connection can also cause trouble for these apps.
AEPS

AEPS is an Aadhaar based digital payment mode. The term AEPS stands for Aadhaar Enabled
Payment Service. Customer needs only his or her Aadhaar number to pay to any merchant.
AEPS allows bank to bank transactions. It means the money you pay will be deducted from your
account and credited to the payee’s account directly.

You need to link your Aadhaar number to your bank account to use AEPS. Unlike Debit cards
and USSD, AEPS does not have any charges on transactions. You can use AEPS with the help of
PoS (Point of sale) machines. You can withdraw or deposit cash, send money to another Aadhar
linked account with it. The good thing about AEPS is that it doesn’t need your signature, bank
account details or any password. It uses your fingerprint as a password. No one can forge your
fingerprints, thus it is the most secure digital payment mode.

Recommended: Debit Card Transaction Charges

USSD

USSD banking or *99# Banking is a mobile banking based digital payment mode. You do not
need to have a smartphone or internet connection to use USSD banking. You can easily use it
with any normal feature phone. USSD banking is as easy as checking your mobile balance. You
can use this service for many financial and non-financial operations such as checking balance,
sending money, changing MPIN and getting MMID.

The *99# code works as a bridge between your telecom operator’s server and your bank’s server.
It uses your registered mobile number to connect with your bank account. Hence, dial *99# with
your registered number only. USSD banking has a transaction limit of Rs. 5000 per day per
customer. RBI has also set a maximum charge of Rs. 2.5 per operation.

Read About USSD Banking in Hindi

Cards

Cards are provided by banks to their account holders. These have been the most used digital
payment modes till now. Many of us use cards for transferring funds and making digital
payments. Credit cards, debit cards and prepaid cards are the main types of cards. You can also
use Rupay debit card for digital payments.

Credit cards are issued by banks and some other entities authorized by RBI. These cards give
you the ability to withdraw or use extra money. Credit cards are used for domestic as well as
international payments.

Debit cards are issued by the bank where you have your account. You can use these cards for
the money in your account. The payments you make with these cards debit from your account
and credit immediately to the payee’s account. You can use these cards to make payments to one
bank account to another.
Prepaid cards are another type of cards which you use to pay digitally. You must have to
recharge these cards before using just like prepaid SIM cards.

Cards are one of the best modes when you pay at portals or E-commerce sites. But if we talk
about paying to merchants it is not the most suitable way. It charges 0.75% – 2.0% on
transactions. Also, you cannot use cards to pay if the merchant does not have a PoS (swipe)
machine.

E-Wallets

E-wallet or mobile wallet is the digital version of your physical wallet with more functionality.
You can keep your money in an E-wallet and use it when needed. Use the E-wallets to recharge
your phone, pay at various places and send money to your friends. If you have a smartphone and
a stable internet connection, you can use E-wallets to make payments. These E-Wallets also give
additional cashback offers. Some of the most used E-wallets are State bank buddy, ICICI
Pockets, Freecharge, Paytm etc.

Also Read : BHIM Vs Paytm

E-Wallets are an easy and faster way to make payments but have some limitations. These apps
are good if you send money to a wallet to another. But if you want to send money to a bank
account these apps are not suitable. Also, you have to be extra careful with these apps. These
apps do not ask for any PIN or password when you perform a transaction using your wallet
money. If you do not lock your phone, anyone can use the money in your wallet. I suggest you
must lock your phone if you want to use E-Wallet apps.

Advantages of Digital Payments

Easy and convenient: Digital payments are easy and convenient . You do not need to take loads
of cash with you. All you need is your mobile phone or Aadhaar number or a card to pay. UPI
apps and E-Wallets made digital payments easier.

Pay or send money from anywhere: With digital payment modes, you can pay from anywhere
anytime. Suppose your close friend’s mother fell ill at night. He called you at midnight and asked
some money. Don’t worry, you can send money to your friend using digital payment modes such
as UPI apps, USSD or E-Wallets.

Discounts from taxes: Government has announced many discounts to encourage digital
payments. If you use digital modes to make a payment up to Rs. 2000, you get full exemption
from service tax. You also get 0.75% discounts on fuels and 10% discount on insurance
premiums of government insurers.

Written record: You often forget to note down your cash spendings. Or even if you note, it
takes a lot of time. But you do not need to note your spendings every time with digital payments.
These are automatically recorded in your passbook or inside your E-Wallet app. This helps to
maintain your record, track your spendings and budget planning.

Less Risk: Digital payments have less risk if you use them wisely. If you lose your mobile
phone or debit/credit card or Aadhar card you don’t have to worry a lot. No one can use your
money without MPIN, PIN or your fingerprint in the case of Aadhar. But it is advised that you
should get your card blocked if you lost it. Also call the helpline of your E-wallet to suspend the
wallet account to prevent anyone from using your wallet money.

Drawbacks of Digital Payments:

Every coin has two sides so as the digital payments. Despite many advantages, digital payments
have a few drawbacks also.

Difficult for a non-technical person: As most of the digital payment modes are based on
mobile phone, the internet and cards. These modes are somewhat difficult for non-technical
persons such as farmers, workers etc.

The risk of data theft: There is a big risk of data theft associated with the digital payment.
Hackers can hack the servers of the bank or the E-Wallet you are using and easily get your
personal information. They can use this information to steal money from your account.

Overspending: You keep limited cash in your physical wallet. Hence, you think twice before
buying anything. But if you use digital payment modes, you have all your money with you
always. This can result in overspending .

Future of Digital Payments:

The future of digital payments is very bright. India is experiencing a remarkable growth in digital
payments. In 2015-16, a total of Rs. 4018 billion transacted through mobile banking as compared
to Rs. 60 billion in 2012-13. The percentage of the digital payments through other modes is also
increasing in a significant speed.

There are many factors which are affecting the future of digital payments.

Digital revolution

Digital revolution has provided an easy way to go for digital payments. India has more than 100
crore active mobile connections and more than 22 crore smartphone users as of March 2016.
This number is going to increase further with a faster internet speed. The reach of mobile
network, Internet and electricity is also expanding digital payments to remote areas. This will
surely increase the number of digital payments.
Government’s support

The government is supporting digital payments a lot. It has reduced some taxes and announced
incentives for digital payments. It has launched Lucky Grahak Yojna for customers and Digi
Dhan Vyapar Yojna for shopkeepers. You can get cash prizes up to 1 crore if you pay digitally.
Due to these incentives and waivers, more people are showing interest in digital payments.

Digital payments have been on the rise in India during the past few years. With the advent of the
game-changing policy of demonetisation introduced by Prime Minister, Mr. Narendra Modi, it
has become inevitable that digital payments are here to stay. The change is so revolutionary that
it brings out an interesting commonality between a street peddler in India and top central bankers
and finance ministers. Both can benefit from the digital boom. It has spread across the world, but
has grown much faster in India, in recent times.

Let’s take a look at some of the factors that are responsible for this boom:

Indians’ preference for using debit cards over credit cards

continues among the e-wallet users. Net banking is also popular
ahead of credit card. In a sense, India’s traditionally low credit
card penetration has been overcome with a generation of users
jumping to e-wallets without using credit cards.
BHIM is the least-used payment channel, highlighting the need to
market it.
User Preference: Digital Payment Channels
60%
45%
35%
09%
Debit card
Net Banking
Credit Card
BHIM

://www.regalix.com

http://digital-guru.in/uncategorized/a-revolutionary-change-the-rise-of-digital-payments-in-india/

https://www.civilsdaily.com/story/cashless-society/