This article discusses the rise of digital payments in India citing a few examples from the Fintech industry.
Digital payments, which form part of mobile payments, also work through digital wallets (P2P) is very convenient to use. They bypass savings and checking account and form as an alternative to using credit or debit card. P2P Digital wallets are linked to your savings/checking account to easily transfer cash for facilitating purchases online or payment of utilities etc. China’s is setting the benchmark for innovation not only in e-commerce but also in many emerging technologies. Apart from Alipay, WeChat Pay is another leading digital online payment player in China. Jack Ma also invested in Paytm, the leading online payment player in India, which is planning to create the largest digital bank in the world. The milieu of innovation and entrepreneurship is also due to the fast emerging technology ecosystem within China.
Digital payments are a great way to further cashless payments within an economy so successfully done by Sweden in Europe. A major revenue growth area for Amazon would be Amazon Pay as an alternative mode of payment for online purchases while Apple Pay and Google Pay are already huge players in this segment. Whats App is launching its version of digital payments while Venmo from Paypal is a prominent rising P2P digital payment star in the US. India has been a leader in digital payment space.
Credit Suisse estimates that the mobile payments in India will reach $1T by 2023, a huge growth from the estimated $200B in 2018. The surge in the fintech industry in India is hugely due to the policies promoted by the present government for encouraging incentives like digital lockers. Mr. Modi’s thrust to promote digitization is also a very measured way to bring underbanked people in India into the banking sector. Paytm digital bank can accept deposits and remittances but can not lend, to mitigate risk-taking behavior. This would also help the unbanked population in India to be included in the banking sector. According to many reports, there are more than 60 fintech players in India in the digital payment segment, a surge due to Indian government pro digitization policies especially after 2016. (Citation would be included).
Deloitte estimates the mobile wallet industry has shown a huge growth between 2013 and 2017, with a phenomenal growth of 120% CAGR, having more than doubled in 2016 and 2017. The report further estimates, that prepayment instruments increased from 10% to 22% of total digital transactions soon after the commencement of demonization policy. A major policy initiative taken by the government was to introduce Unified Payment Interface, a real-time payment processing system to transfer cash online from account to the wallet. Launched in 2016, this is one of the most innovative features in the world and serves as a catalyst for the proliferation of digital payment system in India.
Mobile payment has been one of the most innovative technological methods used in poor countries especially sub-Saharan countries to propagate financial inclusion. Mobile payment has been one of the most impactful financial inclusion tools of modern times.