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6 Ways India's payment landscape is Reshaping: Cash and Digital A look at the present scenario and how the payment landscape of our country is transforming

By Rohit Kumar

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Imagine you are on the road about a decade ago. You need to buy something urgently and have just lost your wallet. You merely have your phone and nothing else. Thankfully, you use netbanking and could make the transaction through quick touches and swipes on your mobile phone, saving you from the problem that you've just stumbled upon. You try to explore your options by asking the shopkeeper if you can have his bank details in order to make the transaction. Sadly, he doesn't have one, just like the others in the vicinity.

Cash, as it is apparent, has been a dominant entity within India since time immemorial. This is because people never had a better alternative to cash. Thankfully, this inherent challenge is gradually becoming a thing of the past with the ever-increasing influx of digital technology to people's day-to-day lifestyle. So, let us have a quick look at the present scenario and how the payment landscape of our country is getting reshaped.

Smartphone Adoption: The fast-increasing digital footprint of the country

According to a recent McKinsey report, Indian Internet users will increase by 40% through 2023, while smartphone users will double by the same period. This growing adoption of smartphones and the Internet is acquainting our nation with a new, ultramodern era. It is creating an ever-connected market wherein customers can enjoy on-the-go access to products, platforms, and services with the touch-of-a-button experience. This is empowering digital services and, as a result, digital payments in India. India is further working on the BharatNet Project, which envisions to integrate all 250,000 Gram Panchayats of India with high-speed internet services. This will further drive rural digital adoption and bring more aboard the digital bandwagon.

Strengthening Regulatory Framework: The Government's Push for a "Less-cash Economy'

The government, as well as the respective regulators, have taken a slew of measures to catalyze the digital adoption amongst the Indian masses. Digital India, Smart Cities Mission, Startup India, Make in India (for technology acquisition), Aadhaar enrolment (and Aadhaar Pay), UPI, GST, Demonetization, etc. have been a part and parcel of such measures. Simultaneously, the government is increasing the overall transparency and eliminating economic offenses from the system to prevent leakages and non-compliance. This is enabling more industries (including the retail segment) to view digital payments as a resource to unlock superior efficiency, and not as a mechanism of scrutiny.

The Catalyst: Personalized Offers, Deals, and Services make Digital Payments more appealing

It is interesting to note that consumption isn't the driving force behind digital adoption – especially vis-à-vis digital payments. It is the other way round. According to a recent BCG-Google study titled "Digital Payments 2020', digital payments give access to customer transaction data. This enables Payment Service Providers (PSPs) to offer personalized deals, discounts, offers, and coupons to customers, thereby having a direct impact on their purchase decisions. The study also noted that $500 billion will flow in digital payments within the country – or roughly 1/6th of the national GDP – by 2020. Out of these, merchant payments will constitute 40 percent.

Rural Self-help Kiosks Eliminating MSME Credit Gap by Unlocking Payments Data

As they say, data is the new oil. However, due to low digital adoption, rural geographies have minimal to negligible data, especially the one relating to customer payments. This is an area where cutting-edge and tech-driven approaches such as rural self-help payments kiosks vans are bringing about a tangible difference. While empowering rural customers with digital payments and services, they are also unleashing a treasure trove of data which can enable businesses to visualize demand and aptly address it. The gradually increasing rural-centric data is also helping drive financial services and expanding the reach of our formal economy.

Multiplier Effect: Superior Efficiency with Business Intelligence powered by Data Analytics

Another advantage is that the generated payments data can be leveraged by the MSMEs to create additional insights via Business Intelligence solutions. This enables them take to informed decisions, maximize their productivity, and catalyse growth. For customers, digital payments are advantageous as it directly adds to their overall flexibility without relying on cash, which can have several undesirable outcomes such as the one mentioned in the beginning or pertaining to "small change'. This creates greater efficiency within the system and directly increases the circulation of money, thereby has a multiplier effect within the market as well as respective segments.

ATC Vans to further Rural Digital Payments

The growing thrust on digital payments is also acquainting the market with novel, tech-driven tools and approaches. Apart from smartphone penetration and ubiquitous connectivity, biometrics, tokenisation, cloud computing, and Internet of Things (IoT) are some of the factors that are adding an impetus to this trend. This is why we are witnessing the adoption of digital solutions like ATC (All-Time-Cash) vans and self-help kiosks in rural geographies. Solutions such as these – which offer cash disbursal and online payments (such as electricity bill, phone bill, and other utility payments) – are empowering our rural populace with new-age digital services. This is taking them one step forward towards digital adoption by making digital services a part of their lives. Further, it prevents them from physically traveling to the nearest city or the respective department to complete such transactions, thereby making them more productive and efficient.

Customers, moreover, prefer simpler and universal solutions. Here, UPI – with its cost-effectiveness and interoperability with regard to PSPs – is proving to be a game-changer and will continue to do so throughout the foreseeable future.

Today, the non-cash payments contribute a mere 22 percent of all digital payments. This is going to completely invert over the next ten years. Perhaps, overtaking the cash-based payments as soon as 2023. Digital payments solutions will undoubtedly be a prime driver in this ongoing trend – thereby, preventing a majority of us from facing the hardships and inefficiencies that are inherent to cash.

But what will happen if a person neither has a wallet, nor does he have his smartphone or any other digital device? Tech-driven solutions like Aadhaar Pay (which can be deployed by merchants to process Aadhaar-based transactions) depend on neither of them. This is the true essence of digital technology, which is on verge of becoming an indispensable part of our day-to-day lifestyles.

Rohit Kumar

CEO & CMD, XPay.Life

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