Why India is Not Adopting Digital Payments in the Absolute Sense?

Even millennials, who have every possible means to adopt alternate modes of payment, are still hesitant about the whole idea of totally shifting gears to the alternate digital mode of payment

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Fintech in India is set to become a trillion-dollar economy. The digital payments sector is growing at a fast pace. According to the National Payments Corporation of India (NPCI), BHIM Unified Payments Interface (UPI) transactions touched INR 1 trillion in value and 913 million in volume, up from a paltry 7 million volume in April 2017. In a country, where there are umpteen economic and financial issues, thanks to the likes of PhonePe, Paytm, Google Pay and most essentially, demonetization, people have started realizing that alternate modes of transactions do exist and it is only matter of time that people adopt them.


Despite India witnessing robust growth in the digital payments sector, people are still not adopting it in the absolute sense. Even millennials, who have every possible means to adopt alternate modes of payment, are still hesitant about the whole idea of totally shifting gears to the fintech sector for their day-to-day needs. If you don't believe words, then believe numbers. According to data from the RBI, the total currency in circulation stood at INR 18.13 trillion on March 9, 2018 which was significantly higher than the INR 17.97 trillion on November 8. Clearly, there has not been a decrease in cash as a payment instrument. It is time to critically analyze what stops them from doing so.


The aspect of trust is a big reason why millennials are not adopting this mode of payment. Trust with respect to your personal details that one is required to share during the transactions. How secure is your personal data? What is the certainty that your data remains secure? Such questions that prevent people from choosing the digital payments option.

Aadhar is a good example. When Aadhar was introduced in the Indian ecosystem, joy waves spread around the country. It is not wrong to say that Aadhar changed the face of the Indian fintech ecosystem. However, the importance of it could not last long because the policymakers were unable to fix the security concerns.


The government or the leaders may have a plan to make India a cashless nation or even a more "digitized India" but the nation is struggling with a major chunk of population which is not technologically savvy. According to the Census of India, out of the 1.21 billion people in India, more than half of it, 833 million, lives in rural areas. According to Statistica, the number of smartphone users as of 2017, is only 299.24 million, which means that a majority of the population which is living without smartphones have no means or touch to digitization. This inability of people to be technology-friendly stops many of them from adopting any other alternative modes of payment.


Infrastructure is also one of the reasons why fintech or digital payments sector hasn't been able to see the kind of growth that is expected out of it. Lack of infrastructure has created several inconsistencies and uncertainties with respect to digital payments in India and has caused a feeling of distrust among people. Sometimes, the procedures to adopt digital payments are long and cumbersome and henceforth, people believe it is better to have cash as the primary instrument of payment.