DIGITAL PAYMENTS AND ITS FUTURE IN INDIA Chandra Bhooshan Singh
Research Scholar, School of Commerce, DAVV Veronika Bhagoria
Research Scholar, School of Commerce, DAVV
Abstract:- We all are familiar with the term digital money today. Digital money is the money that is available in the digital or electronic form. Although digital money can be used with the help of different digital payments method. As we know India is moving towards digitalisation. The major focus of this paper is to know about the digital payments within the country and about the future of digital payments in the country. Whether the people of the country are actually making digital transactions or are more inclined towards the use of cash. And also, to digital payment has any future in India or not. This paper also includes the impact of Covid-19 on the usage of digital payments within the country.
Keywords: Digital money, Digital payments, Demonetisation, UPI, Covid-19 etc.
1. INTRODUCTION
India has always been a great economy. People in India have always been into making transactions very frequently. Earlier the only medium of transaction was cash but today there are various different modes of payments. The Online mode of payment is one of the modes of making transaction now a days. Cash has always been the most common and convenient mode of payment but as the country is moving towards development and there is a great requirement of digitalisation. India is among those countries which is promoting digitalisation within the country. The major change in the mode of transaction took place after demonetisation. Digital Payments were encouraged by Government of India after the announcement of demonetization on 8th November 2016. This major decision was taken to achieve cashless economy. The usage of digital money is possible with the help of different types of digital payments that are available in the market. The concept of digital money was to ensure transparency in the operations made by the people of the country. Also making digital payments helps to keep record of each and every penny spend by the person. Digital payments are now majorly used by the people.
The digital payment system is slowly replacing the traditional method of payments.
People nowadays are accepting the digital mode of payment. People have start adapting the digital payment method over traditional method.
Also, we cannot avoid the current scenario of the country. The whole country is suffering from the pandemic ‘Covid-19’ which has caused huge economic loss to the country. People are facing huge financial loss and this loss has led to degradation of the financial system of the country. The impact of pandemic can be seen on the usage of digital payment as people are unable to make payments due to shortage of funds within the country.
So, here in this paper we would be discussing about how the digital money is used by the people and also, what are the various methods with the help of which people make payments online and the impact of pandemic on the usage of digital money. As well as whether the adoption of digital money has a great future ahead or not.
2. LITERATURE REVIEW
Pandey and Rathore (2018) in their study discussed the impact of digital payment system.
Due to modernisation and globalisation it was very important for the people to accept the modern method of payment. The study is based on secondary data and various literatures from past papers and government data. All data collected has been analysed and used to find the impact and adoption of digital payments by the people.
Singh (2017) in his study showed that how digital payment and digital wallet in India was get popularized due to demonetization. As there was a tremendous growth in the usage of internet and the no. of smart phone users were also increasing so people found it convenient to use as an alternative for cash. In this study he also pointed out that how different digital wallet companies were having competition to enter and expand the Indian market as it was the best opportunity for them to establish their company. It was also
predicted that in future India will become a cashless economy and with digitalization people will surely adopt the digital mode of payment. ANOVA was used in this study to show that there is no significant variance in the consumer perception with respect to its demographic factors.
Midha (2016) the author discussed the issue of digitalization process and effectiveness of digital India campaign. The programme is a good initiative but it has certain barriers which need to be overcome. Digital India campaign aims to create a cashless society which has its own advantages. Implementation phase is surely problematic as the concept is new but over the time period this has to be seen from the perspective of customers. It is high time to discuss the relevant issues with the customers so that the existing barriers may be removed.
Sanghita Roy, Dr. Indrajit Sinha (2014) stated that E- payment system in India, has shown tremendous growth, but still there has lot to be done to increase its usage. Still 90% of the transactions are cash based. Technology Acceptance Model used for the purpose of study. They found Innovation, incentive, customer convenience and legal framework are the four factors which contribute to strengthen the E- payment system.
3. DIFFERENT MODES OF DIGITAL PAYMENTS 3.1 Plastic Cards
These are the cards that banks issue to account holders, and they can use them to withdraw money from any ATM by entering their password. These cards are used to deposit money into banks in order to reduce paper waste. Debit and credit cards are the two types of cards issued by banks. Debit cards are distributed to all account holders, while credit cards are only distributed as per customer’s request. Debit/credit or prepaid banking cards have the benefit of being able to be used for other forms of digital payments. To make a cashless payment, customers can store card details in digital payment applications or mobile wallets. Visa, Rupay, and MasterCard, among others, are some of the most reputable and well-known card payment systems. Online transactions can be made with banking cards.
3.2 UPI
Unified Payment Interface is the mode of payment in which user make the payment with the help of different payment making applications available. The funds can be transferred between the two people using the UPI app. Fund transfer is only possible with the help of UPI application. A VPA or UPI ID can be generated by downloading a UPI application. There are multiple good UPI apps available, namely BHIM, SBI UPI, HDFC UPI, Mobile, PhonePe, and others. It is not necessary to use a bank's UPI app in order to use UPI services. Any UPI application can be downloaded and used.
3.3 Internet Banking
The method of conducting financial transactions over the internet is referred to as internet banking. Many facilities, such as transferring money, opening a new fixed or recurring deposit, closing an account, and so on, are available. E-banking or virtual banking are other terms for internet banking. Internet banking is usually used to make NEFT, RTGS, or IMPS online fund transfers. Banks provide customers with a variety of banking services through their websites, and customers can access their accounts using a username and password. Unlike visiting a physical branch, internet banking services have no time constraints and can be used at any time and on any day of the year. Online banking services have a lot of potential.
3.4 USSD
Unstructured supplementary service data, this is the method which was launched of the people who does not have the access to proper banking or internet services. Under this method the transactions are possible without internet. Only the person has to simply dial
*99# on any essential feature phone. Customers may use this number to request services such as interbank account to account fund transfers, balance inquiries, and mini statements from all Telecom Service Providers (TSPs). USSD service is available in 12 languages, including Hindi and English, from about 51 major banks.
3.5 Mobile Wallet
As per the name it works same as the wallet. It is an online wallet which carries the money in digital format. Customers often connect their bank accounts or bank cards to their wallets in order to make safe digital transactions possible. Another way to use wallets is to load money into a Mobile Wallet and then move money using that balance. Some popularly used ones include Paytm, Freecharge, Mobikwik, mRupee, Vodafone M-Pesa, Airtel Money, Jio Money, SBI Buddy, Vodafone M-Pesa, Axis Bank Lime, ICICI Pockets, etc.
There are several other modes like Aadhaar Enabled Payment System (APES), mobile banking, bank prepaid cards, PoS terminals, Micro ATMs that are helpful in making digital payments. Because of so many options it is easy and convenient for the people to make transactions from anywhere around the globe.
4. USAGE OF DITAL PAYMENTS IN PAST YEARS
From about 2.38 digital transactions per capita in financial year 2014, to 22.42 transactions per capita in financial year 2019, cashless payments had shown significant growth. In a cash-dominant country like India, the scope and means for cashless digital transactions had grown steadily over the last decade.
The value of digital payments in the south Asian country of India was over 21 trillion Indian rupees in the financial year 2020. This was a significant increase from the previous financial year's value of over eight trillion rupees. Increased penetration of smart service applications and digital technologies are the primary contributors to the enormous growth in digital payments in the country.
The volume of digital payments in the south Asian country of India was over 12 billion in the financial year 2020. This was a significant increase from the previous financial year's value of over five billion. Increased penetration of smart service applications and digital technologies are the primary contributors to the enormous growth in digital payments in the country.
In February 2021, providers of unified payments interfaces (UPI) in India recorded a total of 2.3 billion digital payment transactions worth over four trillion Indian rupees. This was a slight decrease compared to January 2021, but still marked a year-on-year growth of over 70% in volume of transactions.
The amount of the monthly transactions made through the Immediate Payment Service as of November 2020 amounted for approximately 2.76 trillion Indian rupees. A slight dip in value was recorded in the months of the coronavirus (COVID-19) lockdown between March and June 2020.
In financial year 2019, the share of real time gross settlement payment systems in India was the highest in terms of value, with over 77 percent of the transactions done through this system. Other payment systems like NEFT and paper clearing came second to RTGS in terms of the value of payment transactions.
Real Time Gross Settlement transaction volumes amounted to approximately 150 million in fiscal year 2019 across India. This was a significant rise from only 81 million in
fiscal year 2014. RTGS includes customer transactions, interbank transactions and clearing.
5. IMPACT OF COVID-19 ON THE USAGE OF DIGITAL PAYMENTS
As per the reports of KPMG the digital payment sector has witnessed around 30% decline in the transaction value. According to the data provided by National Payments Corporation of India (NPCI) there has been a sharp decline in the payments within the two months of initiation of lockdown. But the government had tried its best by promoting different online modes to make payment easier like National Electronic Fund Transfer (NEFT), Immediate Mobile Payment Services (IMPS), BHIM, UPI etc so as to avoid the physical exchange of cash, which has a higher risk of transmission of the Covid within the people. This clearly shows the adverse effects of COVID-19 on payments, although it is significant, not permanent, and the digital payments ecosystem in India is expected to evolve rapidly to help shape the growth of the post-Covid-19 era.
Further the RBI's report on Trends and Progress in Indian Banking for 2019-20 highlighted how COVID-19 has accelerated the adoption of digital payments as consumers preferred to stay away from cash.
6. FINDINGS AND SUGGESTIONS 6.1 Findings
The COVID-19 pandemic has led to a diminution in digital transactions in India. In corroboration, the growth of currency with the public in India accelerated from 11.2 per cent on February 28 to 14.5 per cent as on March 31, to 21.3 per cent as on June 19, 2020 (12.8 per cent a year ago).
The cumulative value of digital transactions during January-May 2020 declined by 25.5 per cent (y-o-y) as compared with a strong growth of 20.6 per cent a year ago.
Digital retail transaction value growth contracted by 10.6 per cent as compared with an increase of 31.3 per cent last year.
In digital payments, the retail RTGS volume, which had registered healthy growth (y- o-y) since July 2019 due to waiving of RTGS charges by the Reserve Bank, declined in March (-12.3 per cent), April (-52.5 per cent) and May (-27.5 per cent).
Transactions through Immediate Payment Service (IMPS) had started declining in February 2020 and the drop became sharper in April 2020.
Unified Payments Interface (UPI) transaction volume declined by 5.9 per cent in March 2020 and further by 19.8 per cent in April 2020 to slightly less than one billion transactions. However, it recovered as the lockdown was gradually lifted and logged a record 1.34 billion transactions in June 2020.
The decline in digital transactions during the lockdown period is indicative of the integration of the digital economy with the real economy.
6.2 Suggestions
Government should promote the use of digital payments to make more and more people aware of it.
One of the major reasons of least use of digital payment is people are still not aware of such online modes of payments.
In such critical situation people should avoid using cash as it may become carrier of virus.
Using digital mode payment not only will help in reducing of chances of spreading virus but also provide various monetary benefits like cashbacks, reward points etc.
Various offers should be provided on the usage of digital [payment to attract people for making online transactions.
Proper surveillance should be done by the government to avoid online fraud so that people can use digital mode of payment without any fear.
There should be proper redressal system to solve the complaints made by the people quickly.
7. CONCLUSION
As per the above data and the research it can be easily concluded that digital payment has become a major part of the people day to day life. People are becoming more dependent on digital payment system over traditional payment system. We can also see that there is definitely rise in digital transactions since few years but we should also focus on the fact that previous year the number of digital transactions decreased due to COVID-19. But it can be easily concluded that people have started making digital transactions which means that the future of digital payment system is better in the country.
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