Digital Payments and Their Impact On The Indian

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DIGITAL PAYMENTS AND

THEIR IMPACT ON THE


INDIAN ECONOMY
By
NIVETHITHA . A
II M.COM
AYYA NADAR JANAKI AMMAL COLLEGE
INTRODUCTION

• India had 1.18 billion mobile connections , 700 million Internet users, and about 600 million
smartphones
• 25.5 billion real- time payment transactions
• Ranked 1 st in the world (number of transactions in 2020)
• In 1996 - ICICI introduced online banking services by using electronic banking
• In 1999 – HDFC, IndusInd, Citi launched online banking facilities.
• In 2008 – National Payments Corporation of India started its journey (formed by RBI and IBA).
TYPES OF DIGITAL PAYMENTS IN INDIA

• BANKING CARD
• AEPS
• UPI

• MOBILE WALLET
• BANK PRE-PAID CARD
• INTERNET BANKING
• MOBILE BANKING
• MICRO ATM
BANKING CARD

• Plastic card issued by a bank to its clients that performs one or more of a number of services that
relate to giving the client access to bank account.
• Linked to a depository account, including ATM cards and debit cards.
• Used for e-commerce purchases and other kinds of spending, with the amount deducted directly
from the account at the time of transaction.
AADHAAR ENABLED PAYMENT SYSTEMS (AEPS)

• Aadhaar Enabled Payment System (AEPS) is a payment service that allows a bank customer to
use Aadhaar as his/her identity to access his/her Aadhaar enabled bank account.
• The services available under Aeps:
i. Cash Withdrawal
ii. Balance Enquiry
iii. Mini Statement
iv. Aadhaar to Aadhaar Fund Transfer
UNIFIED PAYMENT INTERFACE (UPI)
• Smartphone application that allows users to transfer money between bank accounts.
• Single-window mobile payment system developed by the National Payments Corporation of
India (NPCI).
• Eliminates the need to enter bank details or other sensitive information each time a customer
initiates a transaction making it a safe way to bank.
MOBILE WALLET

• Also known as an e-wallet


• An electronic device, online service, or software program
that allows one party to make electronic transactions
• Way to carry cash in digital format.
• Link your credit card or debit card information in mobile
device to mobile wallet application or you can transfer
money online to mobile wallet.
MOBILE BANKING

• Service provided by a bank or other financial


institution that allows its customers to conduct
financial transactions using a mobile device such as a
smartphone or tablet.
• It uses software, usually called an app, provided by
the financial institution for the purpose.
• Mobile banking is usually available on a 24-hour
basis.
• Mobile banking is dependent on the availability of an
internet or data connection to the mobile device.
MICRO ATM
• Micro ATM meant to be a device that is used by a million
Business Correspondents (BC) to deliver basic banking
services.
• Enable function through low cost devices (micro ATMs)
that will be connected to banks across the country.
• Customers would just have to get their identity
authenticated and withdraw or put money into their bank
accounts
• Supported by micro ATM are Deposit, Withdrawal, Fund
transfer and Balance enquiry.
GOVERNMENT SCHEME AND ITS
OBJECTIVES
• Launched Digital India Programme in 2015
• Vision of this scheme: to transform India into a digitally empowered society and knowledge economy
• Focuses on three main visions areas : Digital Infrastructure to every citizen, Digital services &
governance on demand and Digital empowerment of citizens.
GROWTH IN DIGITAL PAYMENTS IN INDIA
• FY 2010-2011, The number of digital transactions was 4.98 billion (valued Rs.96 lakhs crores).
• FY 2020, The number of transactions surged to 16.23 billion (value increasing to 3435 lakhs
crores).
LAUNCH OF UPI
• Launched in India in the year 2016
• Multiple bank accounts into a single mobile applications
• Allows user to make transactions and merchant payments
• Total 297 banks linked to the UPI platform (46 service providers and 251 issuers)
IMPACT OF UPI IN THE ECONOMY
• After the launch of UPI in 2016 – only 21 banks are live on UPI
• Due to adoption of digital payments – currently 297 banks are live on UPI
• The number of transactions was barely 0.10 million in Oct 2016
• The number of transactions was around 4.2 billion in Oct 2021
IMPACT OF INDIA’S DIGITAL PAYMENT ECOSYSTEM

• Amount of black money in the market can be reduced.


• Control unauthorized transactions that can be conducted easily through cash.
• Reduction in the hard cash would helps to avoid tax frauds which would drive growth in India’s
tax income.
• Boost the number of tax payers
• MSME sector can benefit largely from digital payments
ECONOMIC IMPACT

• Many offers, coupons, discounts and rewards can be offered to the users.
• Makes marketing of companies and services easy and fruitful
• Boosts consumer spending ; increase in buy and sell activities would drive growth in the
economy
• Monitor illicit activities
• Helps in tracking the economic activities in the country
• Mobile banking and Payment apps helps consumer to pay electricity bill, tv, mobile and any
other bills
BROADER IMPACT

• Digital payments have been widely accepted by the people of India.


• India has paved its way to occupy the central position in digital payment innovation.
• The digital payment ecosystem will impact businesses, individuals and government. The key
payment trends within the overall payment space in India will:
Lead to the entry of tech giants and emergence of new business models
Drive the popularity of open banking systems
Affect offline payments
Lead to the emergence of committed payment systems
ENTRY OF TECH GIANTS AND NEW BUSINESS
MODEL

• The digital payment space has seen some of the prominent tech giants investing in an
opportunity worth US$ 3.6 trillion.
• Factors that facilitate the entry of tech giants include:
Various platforms to influence offering
Greater access to the consumer data pool
New and existing consumer base
Relatively fewer regulations as compared to banks
A large existing revenue pool
Digital payments not only address the existing business needs of big tech firms but also
guarantee greater consumer adhesiveness.
IMPACT ON OFFLINE PAYMENTS

• Cell phones are increasingly being used for making digital payments, compared to plastic
cards.
• The RBI’s move to allow offline digital payments of an amount not exceeding US$ 2.6 (Rs 200)
without an active Internet connection will be a game-changer for this industry.
• The RBI is now allowing solution providers to ignore the two-factor authentication, like the
Unified Payments Interface (UPI), which could result in more merchants adopting payments
solutions such as the Unstructured Supplementary Service Data (USSD), SIM overlay and near-
field communication (NFC).
FUTURE OF DIGITAL PAYMENTS IN INDIA

• India is expected to grow to US$ 700 billion in 2022


• The pandemic gave a strong boost to the Indian digital payments industry and increasingly more
users are switching to digital modes every day
• fintech industry gaining a solid footing in the Indian market, more innovative and better
payments modes will hit the market in the future
• the government of India has launched various initiatives to promote the use of digital payments
• The DigiDhan, Di initiative, Cashless India are some of the schemes launched with aim of
accelerating digitalization
• India’s digital payments market is expected to expand to US$ 1 trillion by 2023. By 2025,
India’s digital payment industry is projected to grow to more than 300% of its current size
THANK YOU

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