Debit or Credit, Digital is Hot

Long waiting lines at the teller counter; service delays; altercation; pushing by the security guard…This is not a staging post of any Bollywood movie; but the real life  bank experience many of us have had not long before. This also speaks as to why digital transactions are attracting eye-popping numbers across the globe. Convenience apart, in the Indian context,  digital mode also eliminates corruption.  The targeted transfer of welfare scheme are sans ‘leakages’ these days.  ….To read more browse through  this article.

According to ‘ACI Worldwide’, the number of real-time digital transactions that were processed across the world ^[1] in the year 2020, crossed 70.3 billion, recording a 41 % rise in digital payments over the previous year 2019. According to the report, India is still leading the digital payment surge through its unique and innovative UPI platform. Globally the mobile wallet adoption ^[2] rose from 18.9 % in 2018 to 40.6 % in 2019 and 46 % in 2020.

What are Digital Payments ^[3]?

Digital payments are transactions that take place via digital or online modes, over the internet and mobile channels, with no physical exchange of cash. Digital transactions involve payments that are sent online or through mobile computing and internet-enabled devices. This evolved over time with fintech companies collaborating with various sectors of the economy to bring ease and convenience to the payment mechanism.

Popular modes of Digital Payments ^[4]

1. Bank Cards: which use card payment systems like Visa, Rupay, and MasterCard, for online purchases, PoS machines, etc.
2. USSD (Unstructured Supplementary Service Data):  which works even on basic mobile phones (feature phones), without mobile data
3. AEPS (Aadhaar enabled payment system): which can be used for all banking transactions that are carried through Aadhaar verification with the help of a banking correspondent. 
4. UPI (Unified Payment Interface) ^[5] : Helps to bring multiple bank accounts into a single platform, using which any customer having an account with any bank can transfer money to any other bank account.
5. Mobile Wallets ^[6] : A type of virtual wallet service which stores details about any bank account or details about the debit card or credit cards issued by banks.  Secure payments are done without disclosing the card/ bank account details as the information is stored in an encoded format only. A wallet can also hold money to be used for making payments using computers, mobile phones, or even smartwatches.
6. Internet and Mobile banking: Banks providing services so that customers can transact through computers and mobile phones.
7. Bharat Interface for Money (BHIM) app: which works in collaboration with UPI and using a VPA allows users to make payments.

Global Rankings by number of real-time transactions in 2020

To create a digitally empowered society and knowledge economy the union government launched Digital India program. This has placed India on the top in rankings based on the number of digital transactions.

Rank	Country	No. of transactions
1	India	25.5 bn
2	China	15.7 bn
3	South Korea	6.0 bn
4	Thailand	5.2 bn
5	UK	2.8 bn

Source: ACI Worldwide and GlobalData launch 2021

Reasons for Soaring Digital Payments in India:

• Product innovation of FinTech ^[7] with latest apps and platforms which made payments easier, faster, and cheaper
• Smartphone revolution and access to the internet even in remote areas
• Government’s regulatory support ^[8] and consistent efforts to push digital payments
• The ease of use and the convenience of storing all cards in one mobile phone.
• Various discounts and offers of Mobile wallets, Card service providers, and UPI apps.

Role of the Pandemic in the Digital Adoption ^[9]:

The lockdowns and restrictions due to the pandemic during 2020 have made digital adoption a compulsion. Even though almost all modes of digital payments have seen growth, UPI (developed by NPCI) led the way, accounting nearly for half the volume of digital payments during the first half of FY 21-22. The growth in the volume of UPI transactions in September 2020, when compared in volumes with September 2019 was 88 %. Further, the UPI transactions of September 2021 when compared with those of the same month of 2020, the volume increased by 103 % and value by 98 %.

Digital Transactions, Retail Segment India ^[10]

The objective of creating a“Faceless, Paperless, Cashless”, economy through digitalization of payments is driven by the following retail payment platforms for the last 3 years.

Item	Value (₹ Crore)
2018-19	2019-20	2020-21
UPI	8,76,971	21,31,730	41,03,658
Debit Transfers and Direct Debits	5,24,556	7,19,708	8,72,552
BHIM Aadhaar Pay	815	1,303	2,580
Card Payments	11,96,888	14,34,814	12,93,822
Credit Cards	6,03,413	7,30,895	6,30,414
Debit Cards	5,93,475	7,03,920	6,62,667
Prepaid Payment Instruments	2,13,323	2,15,558	1,97,695
Paper-based Instruments	82,46,065	78,24,822	56,27,189

            Source: RBI Annual Report Publication

Implications of Digital Payment Boom ^[11]:

• Exceptional growth opportunities for Fintech players to enter and innovate in the digital payment space
• Transparency in transactions
• Greater boost for e-commerce players including platforms and their logistic partners
• Tracking and analyzing digital payments would provide a lot of reliable first-hand data about the timing of cash flows, ticket size, and purchasing habits of various classes of buyers for various industries and sectors. This helps the payment providers to design credit offers, discount offers, festive sale offers, match cash inflows with outflows, etc. ^[12]. 
• More cyberattacks and the need for robust internet security
• Better and easy monitoring by government authorities
• Rural India will be able to access some of the products from the urban mainstream and vice versa.  

Learners’ Opportunity

Digital transformation has revolutionised the financial services across the globe.To know more about how digitalization if transforming financial services, check out our program @ https://online.ifheindia.org/

 Discussion Question

The scope of fintech is rapidly diversifying. There are many opportunities like providing online accounting software or creating specialized digital buyer-seller interface, agtitech platforms, payment gateways etc.  Tell us your preference, either to start a business or to nurture a career? Why?

Key Words

#digiltransaction#banking #onlinembacourse  #mbabestcourses  #onlinembaprograms  #elearning  #learningsimplified #onlinembaforworkingprofessionals #entrepreneurshiponlinemba

Source Articles

 [1]       P. Awasthi, “Digital Payments in India to grow to 71.7% of all payment transactions by 2025: Report,” The Hindu Business Line, March 32, 2021.

 [2]       “Global Real-Time Payments Transactions Surge by 41 Percent in 2020 as COVID-19 Pandemic Accelerates Shift to Digital Payments – New ACI Worldwide Research Reveals,” ACI Worldwide, 29 March, 2021.

 [3]       “Digital Payments in India: Definition, Methods, and Importance,” RazorPay, September 17, 2021.

 [4]       “About Digital Payments,” Policy Bazar.

 [5]       GOI, “Unified Payments Interface (UPI),” CashlessIndia, 2016.

 [6]       “Digital Payment Methods: What are they and which ones are the most common,” Santander, August 30, 2021.

 [7]       S. M. Ahluwalia, “Digital payments a success story,” The Times of India, July 13, 2021.

 [8]       S. Param, “Top factors driving the growth of digital payments in India,” Pine Labs, September 20, 2019.

 [9]       Surabhi, “Strong growth in digital payments indicates a lasting shift in consumer payment behaviour,” The Hindu Business Line, October 19, 2021.

 [10]     RBI, “Annual Report: Payment and Settlement Systems and Information Technology,” RBI, May 27, 2019.

 [11]     K. Adhikari, “Rise Of Digital Payments And UPI In India,” Outlook Money, December 15, 2020.

 [12]     R. G. Rajan, “Raghuram Rajan: What the Rise of Digital Payments Means for Central Banks,” The Mint, March 31, 2021.