Post the sudden implementation of Demonetization, the use of digital payment methods in India received a major boost. According to a report by Credit Suisse, Digital payments in India are set to reach $1 trillion by 2023. At present Digital payments in India aggregate less than USD 200 billion, of which mobile is still at just USD 10 billion in financial year 2018E (estimated). It is estimated that the total digital payment market in India will rise to USD 1 trillion by FY23 led by the growth in mobile payments. A chief driver of this growth is India’s huge Smartphone user base – the second largest in the world and one would envisage, then, that the increased use of digital payment methods has led the reduction in the use of cash.

The Indian economy has traditionally been dominated by cash, but with the increased internet penetration and with the rising availability of smartphones together is pushing the economy to a less cash-dependent country, promoting the usage of digital and smart card payments. Introduction of these digital modes – credit card, debit card, Net banking, bank transfer modes, e-wallets, and Unified Payments Interface (UPI) BHIM has made transactions convenient for customers, merchants, and vendors.

Digital payment and its benefit over cash

With Digital payments, the world is our oyster and at every step, cashless payments are helping us save time and money making it easier to regulate and monitor, letting the government prevent fraud, tax evasion, and money hoarding. For instance, one does not need to withdraw cash to book a cab or pay the neighborhood merchant, as a lot of people now accept cards. Digital payments make it possible to finish your chores at the market or go home at your convenience without withdrawing cash from the ATM.

By adopting cashless methods, people do not need to carry around bulky banknotes or plastic cards. What’s more astonishing is that they do not even need to be physically present while making payments! Great convenience has indubitably appeared as the foremost benefit of digital payment methods. Moreover, these payment methods are more consistent, 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 expenses, digital payment methods are helping both in budgeting as well as in calculating income tax payments. Digital methods of payment offer security with predicaments such as lost cash or misplaced cards and security measures such as biometric IDs and two-factor authentication give customers a sense of safety while using these methods.  

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

Even if payments through digital methods such as wallets and UPI are convenient, they remain inherently exclusionary as they are based on internet connections, QR codes, RFID and similar hardware and software that are complex to operate and expensive to own .there are approx.600 million cell phone users without the ability to use the internet or QR codes for payment. The fact that all sections of people do not have access to pre-existing digital payment methods which acts as a huge disconnect in the digital payments landscape.

Mobile or digital payments can replace cash only when these payment methods are as intuitive or frictionless as paying by cash. Particularly in India, what consumers need in order to transition to a more comprehensive digital economy is a fresh look at digital payments –that can make a digital transaction more accessible, intuitive, and convenient.