Factors Influencing the Digital Payment Experience in India

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Factors Influencing the Digital Payment Experience in India: A Usability Study

R. Iyer¹ & M. Christian²

Abstract

The purpose of this study is to examine the progress of digital payments in India. It takes into account the time period beginning with the demonetization that occurred in the month of November 2016. The study takes a note of the expansion of digital wallet businesses following demonetization, demonstrating the increase of digital transactions. The paper also discusses the increase in the percentage of individuals using digital payments, specifically UPI mode, following the onset of the nationwide lockdown as a result of Covid-19. It revolves on the peculiarities of digital payment infrastructure such as UPI, AEPS, USSD, Internet banking, and other payment wallets. It places a major emphasis on the digital transaction mechanism of UPI, demonstrating its growth, advantages, and market ecology, the scope also includes an examination of each mode's awareness, adoption, and usage constraints. The study paper conducts a user behavioral analysis in the form of a questionnaire to assess financial awareness.

Keywords: Digital Payments, Digital Banking, Electronic Funds Transfer, Digital Money, Electronic Payments, Cashless Society, Usability Study, User Experience Design

Introduction

Digital Payments, also known as Electronic Funds Transfer, is the method of sending or receiving money from one account to another using a digital medium such as a mobile, computer, POS Terminal, etc. It also includes payments made with bank transfers, mobile money, and cards.

1 Principal Creative Strategist, Zycus Infotech Private Limited,Mumbai, Maharashtra, India

2 Assistant Professor, GLS Faculty of Computer Technology, GLS University, Ahmedabad, Gujarat, India

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30 Benefits of Digital Payments

1. Saving cost and time with increased efficiency and speed

2. Financial Inclusion by unifying multiple modes of access to money 3. Enhancing transparency by making transactions more traceable

4. Creating a shield of protection and security over internet for trust over these transactions

After Effects of Demonetization - 2016

November 8 2016, the government of India announced demonetization of ₹1000 and ₹500 currency notes. The major motives behind doing this was to:

1. Promote digital payments to make India a less cash economy.

2. Flushing out non disclosed money flows 3. Eliminate Fake Indian Currency Notes (FICN)

4. Convert non-formal economy into a formal economy to expand tax base and employment

Figure 01: Value of Cashless Transactions in ₹ over a period of Sep to Feb 2016.

Due to the after effect of demonetization, by February 2017, digital wallet companies had shown a growth of 271 percent for a total value of 191 crore INR. The steep growth of major prevalent wallets during the said period is listed below:

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1. PayTM saw a 60 million subscribers in 3 months and was at 280 million users by Nov 2017

2. Razorpay witnessed 150% to 200% the same day

3. MobiKwik registered a 7000 per cent increase in bank transfers 4. Freecharge reported in 12X jump.

5. BHIM UPI was launched on December 30, 2016

This caused the volume of digital payments to shoot up. The major barrier was the availability of internet connection. Almost during the same time Reliance Jio increased the internet penetration with free services till December 30th, and got people used to technology on the go.

After Effects of Pandemic - 2020

Thereafter, there has been an exponential growth in adoption of digital payments especially due to pandemic, a time when in-person contacts needed to be minimized. Since March 2020, when Covid-19 forced the first nationwide lockdown, the volume of UPI transactions only jumped nearly 240% while the spike in value terms is over 273%. The total transactions through UPI have reportedly jumped by Rs 4.3 lakh crore since the pandemic hit India. All these facets came together and started making people comfortable with carrying minimum or no cash at all. Here is a snapshot of annual turnover from these digital payments as per an RBI Annual Report.

Fig 02: Annual Turnover of RBI in ₹ for the year 2020 - 2021 split based on modes of Digital Payments

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32 Spectrum of Digital Payments

Like said earlier, Digital Payments have been continuously evolving. Here are all the arms that were opened up to make INDIA a less-cash society.

Fig 03: List of Digital Payment Modes as provided by govt of I

And there are many others like Demand Draft, Cashier’s Cheque, Telegraphic Transfers, Money Orders, etc., which have not been covered in this scope of study for now, considering the frequency of usage in day-to-day life.

Digital Payment Infrastructure Analysis

From the usability standpoint, the list of modes can be split into three major categories.

1. Frequency of Usage. For introducing any new thing, initially the learning curve tends to be higher and then gradually falls down with the increased cycle of usage. A few examples:

a. Mobile Wallets b. UPIs

2. Fit to Purpose. If a mode is ingrained in day-to-day activities like buying groceries or shopping at a mall. People understand that these places let them use any kind of card. Now, they might or might not know what a POS/ Micro ATM is. A few examples:

a. POS/ Micro ATMs were a very good introduction. They are used only at stores and shops where all kinds of debit cards, prepaid cards and credit cards can be accepted.

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b. USSD. Unstructured Supplementary Service Data. This is only for people using a featured phone without internet services.

c. AEPS. Aadhaar enabled Payment System. They are approaches to ease and enhance the banking facilities for users.

3. Keystone Action. Opening a bank account is the keystone action. Alongside benefit is an onboarding kit with internet banking credentials, debit cards. Below listed are the instruments through which one can access the accounts:

a. Internet Banking b. Mobile Banking c. Banking Cards d. Prepaid Cards

UPI, as an emerging instrument

UPI picked up quickly after the launch of the Bharat Interface for Money or BHIM mobile app.

This was launched on 31st December 2016 as a part of Digi Dhan Mela.

Fig 04: Growth in UPI transactions in ₹ from 2016 to 2021

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Fig 05: List of UPI Apps ranked based on number of transactions in July 2021

Benefits of UPI usage For Customers

1. No KYC

2. Interoperability between wallets, UPI and banking apps 3. Increased adoption

4. Simple to use 5. Transaction Limit 6. Bank to Bank Transfer

7. Multiple bank accounts linked to one id 8. QR Code Scan and Pay

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35 For Banks

1. Reduced cash requirements 2. Reduction in operational costs

For Businesses

1. Secure and convenient way to receive payment directly in a bank account.

2. Low-cost infrastructure for receiving payment – QR Code 3. No need to handle cash

4. No risk of storing sensitive data

UPI Ecosystem

As said, UPI unifies all the modes of payments. There are only two major players under the blanket.

UPI and the Bank.

Fig 06: UPI Ecosystem

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36 Mobile and Internet Banking

As soon as your need grows out of the transaction limit of 1L per day, UPI becomes unusable altogether. That is when one falls back on old traditional ways of internet banking and mobile banking. There is a plethora of services that these provide, but for the scope of our study, we shall consider only sending money.

Methods of Digital Fund Transfer

1. UPI: Universal Payment Interface.

2. NEFT: National Electronic Fund Transfer 3. IMPS: Immediate Payment Service 4. RTGS: Real Time Gross Settlement 5. TPT: Third Party Transfer

6. MMID: Mobile Money Identifier

UPI NEFT IMPS RTGS

Full Form Unified Payment Interface

National

Electronic Fund Transfer

Immediate Payment Service

Real Time Gross Settlement

Transfer Timings

Instant

24x7 for 365 days

08:00 to

19:00(Mon- Fri) 08:00 to 13:00 (Sat)

1 batch every hour

Instant

24x7 for 365 days

Instant to 30 minutes

Platforms Needed

UPI App Mobile/ Internet Banking

Mobile/ Internet Banking

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37 Accounts

Needed

UPI Signup Bank Account Bank Account Bank Account

Beneficiary Registration

No Yes Yes Yes

Information Needed

VPA/UPI Id ---OR--- Account No. + IFSC

---OR--- -

Mobile No.

Account No. + IFSC

---OR--- -

MMID + Mobile Number

Account No. + IFSC

Cost Free ₹2.5/- upto 10K

₹5.0/- 10K to 1L

₹15.0/- 1L to 2L

₹25/- for 2L+

₹5.0/- upto 1L

₹15.0/- 1L to 2L

₹30.0/- 2L to 5L

₹55.0/- for 5L+

Limit 1L per day No 2L per day Minimum 2L

Table 01: Modes of Digital Fund Transfer

User Behavioral Analysis

The digital payments have been continuously evolving and the list is continuously growing. There has been minimal evaluation of which ones are in use in the current times. It’s time and a few of these methods would have turned obsolete. As a part of this study, we shall evaluate the level of awareness among people.

Factors affecting the awareness levels of the audience:

1. Age 2. Gender

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38 3. Tech Savviness

4. Level of Education 5. Geographical Location

Questionnaire useful to evaluate financial awareness

1. What kind of payments do you make daily, weekly, monthly, quarterly, annually, once in a while?

2. How do you make them? Online or Offline?

3. Which apps do you use? Name them

4. What are the other payment apps that you have?

5. Do you also send money to friends/ peers?

6. Which are the apps that you use to do that?

7. Do you know what a UPI is?

8. Do you use any UPI apps?

9. Do you use any banking apps?

10. Can a UPI transaction be made through a banking app?

11. What are the features that you use in a banking app?

12. Do you use it for sending money?

13. What kind of payments do you make using the banking apps?

14. Which modes of payments do you use?

15. Do you know what IMPS, NEFT, RTGS are?

16. When do you use each one of them?

17. How are they different from UPIs?

Method of Experiment

The formalized format of the questions listed in the questionnaire are useful to provide a more structured and objective score of awareness of the participants. The scores are ranged as mentioned below:

LOW Medium High Savvy

< 40 > 40 and < 60 > 60 and < 80 > 80 Table 02: Measurement metrics of awareness of financial transaction modes

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39 Conclusion

Demonetization and the pandemic have been key milestones in the digital payment revolution in India. UPI applications have impactfully started to gradually reposition the way monetary transactions are foreseen. This experimental approach aids to analyze the level of awareness of the digital instruments from the available plethora and signifies the outstanding coverage by the mode of UPI due to its ease in terms of user experience.

References:

T.M., Dinesh, "Demonitizaton and its Effects on Digital Payments." Economic Affairs, vol. 63, no. 2, 5 Jun. 2018, doi:10.30954/0424-2513.2.2018.16.

Purohit, Harsh and Purohit, Harsh, Emergence and growth of mobile money in modern India: A study on the effect of mobile money (February 04, 2020). Available at SSRN: https://ssrn.com/abstract=3953654 or http://dx.doi.org/10.2139/ssrn.3953654 Gupta, Abhilasha and Gupta, Abhilasha and SINGHAL, RASHI, Impact of COVID-19 on Digital

2021 | ISSN: 2320-2882 IJCRT2106045, Available at

SSRN: https://ssrn.com/abstract=3872001

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