The Rise Of Digital Payments
India’s digital landscape has soared in the past few years. While demonetisation got the ball rolling in terms of warming people up to the idea of non-cash payments, the pandemic strengthened this affinity. New innovations in the digital payments sphere are further widening this potential market by indexing on convenience and lower cost of transactions.
The increasing internet penetration in the country acts as a catalyst for this transition from cash to digital. While it was impossible to imagine stepping outside without cash a few years ago, it is perfectly normal today to step out with just your smartphones today.
Growth of UPI and the idea of digital currency
The thriving landscape for digital payments today makes it a perfect setting for UPI to thrive as well. UPI has been a clear winner during both the demonetisation and the pandemic. People flocked to it mainly because of its convenience as opposed to cash payments. UPI has had a huge hand in quickening the pace of the digital revolution in India.
In fact, the growth of UPI adoption and UPI payments have been more aggressive compared to any other mode of payment. This can also be pinned down to UPI being one of the more convenient and cost-effective payment methods.
Another flagbearer of this digital revolution in recent times has been cryptocurrencies. It does not require a centralised system, hence making it difficult to regulate. However, the underlying Blockchain technology has potential beyond cryptocurrencies. This technology is being used to launch India’s Central Bank Digital Currency (CBDC). While the idea is still in the nascent stages, once implemented, the digital currency will further improve the convenience of payment and aid simpler and less costly cross-border payments.
Advantages of cardless cash withdrawals
UPI commands a huge user base in India, but there is still scope for acquiring new users and growing further. RBI’s new policy to allow cardless cash transactions is a step toward fulfilling this scope.
What this policy means is that one doesn’t need a physical card to withdraw cash from ATMs. They can do it simply by scanning a QR code on the ATM screens via their smartphones. Not only is this more convenient, but this process also eliminates the fear of card skimming, card cloning, forgetting the card at the machine, etc.
A few ATMs have been providing cardless cash withdrawal facilities already. With this new policy, it will become mandatory for all ATMs to provide this. The best part is that the policy commands no major infrastructural change. The same ATM machines will get a software update to allow the interoperability of cardless cash withdrawal facilities.
Future trends in UPI
UPI was a new phenomenon a few years ago, and therefore its initial adoption was slow. But the good part is, once the users get a taste of UPI, it seems to have a domino effect in converting non-users as well. This can be seen with the exponential growth in the volume of UPI transactions year on year - especially during the pandemic.
As far as its future scope is concerned, UPI essentially facilitates a standardised flow for secure authentication to a bank account - the same thing can be used not only for withdrawals at an ATM but also to standardise authentication for other banking services. Additionally, partnerships with other countries to enable foreign transactions through UPI will also contribute to its growth.
Looking forward, UPI can get even stronger in the future by allowing it to venture into the credit market. Right now, credit payments on UPI are only possible when the customer avails an overdraft facility on the savings or current bank account it is linked to. But the increasing allure of BNPL (Buy Now Pay Later) schemes, and credit in general, make this a potential market for UPI to grow in the future - beyond overdraft accounts.
There are many flagbearers of digital payments in India. Of these, one of the most prominent ones has been UPI. RBI’s policy for cardless cash payments is a step towards making the country more digital-savvy when it comes to transacting, with convenience and safety at its core.
*The author is Sumit Gwalani, Co-Founder, Neobank Fi
