Arijit Bhattacharyya


India witnessed an unexpected growth in digital payment in the present times.
With the huge growth of the mobile and internet penetration, this country is all set to witness a huge growth for adopting the digital payments in the coming years. Moreover, the flagship government initiative like digital India is sure to act as key catalyst thus enabling this transformation.
In the contemporary times, the mobile payments form a crucial part of the overall digital payments industry in India. However, due to the contribution of mobile phones, it is expected to inflate by 2020. As per the new data, released by National Payment Contribution of India (NCPI), the UPI continues to grow strong, clocked 171.4 million transactions, in the month of February, that is 13.5% up from the previous month. Instant money transfer is allowed by UPI between the bank account through mobile phones. Paytm the popular mobile wallet operator, clocked 68 million transactions via UPI in February, thus accounting almost 40% of total UPI transactions, in the country.
The need for the mobile wallet is obviated by UPI which provides a direct connection to the bank account. Among 525-550 million bank account in India could easily be accessed using UPI.This has led to the increase of appeal for service, thus enabling a large number of companies entering the mobile payment game thus increasing the competition in the online finance industry.
Increased traction of service: Government is continually pushing for a cashless economy.The government of India has never been so enthusiastic about digital payments as it is now. The Jan Dhan program of Prime Minister to open zero balance bank accounts has reached near about 90% of households. Demonetisation is really a jerk towards the government's dream of a cashless economy. Smaller digital transaction thus leading to lower cost has further boosted the economic growth.
The digital payment industry will see a surge by ten times to $500 billion by 2020 that is more than $40-50 billion from current estimate as per the report by the advisory firm of IMAP. Demonetisation has further led way for the future digital transaction of the country. The PoS transaction has crossed about Rs 70,000 crore mark by using banking cards. The prepaid instruments like m-Wallet, PPI cards, paper vouchers and also mobile banking have seen a huge rise in terms of noncash transactions. There has been a slow but steady growth of the digital payment system in India. This growth is due to some current factors like increased smartphone penetration, widespread Internet, the rise of e-commerce, growing dependence on apps and more. There has been a sudden increase in m-commerce transaction. This is a testament to the huge availability, penetration of the cheaper smartphones and reducing the mobile data charges.
Advantages: A digital payment forms the integral factor to develop smart cities. It eliminates the hidden cost of cash payments, thus making the entire process more cost-effective, for both individuals and also the government. With traceable electronic payment system, it has become more transparent and compliant thus to reduce corruption. The continual growth of digital payment is totally economical in terms of time spent for making transaction by consumers and businesses. This also reduces the cash related crime, increasing the business sales and maximizing the tax revenues for the government. Digital payment could increase productivity and reduce the amount of time spent on the payment related activities.
The government is one step ahead of private sectors when it really comes to using digital payments. This is really vital for the emerging economies, where most of the wage earners are really paid in cash. For including more people in the net of digitization, the government must have the awareness of the problem caused by the “digital divide.”
Challenges faced in providing connectivity: A digital benefit has many challenges before we realize its full benefits. The limited digital literacy and the lack of adequate infrastructure are a threat thus putting the disadvantaged on the wrong side of the digital divide. Lack of infrastructure for supporting the card payment in rural areas is the basic reason card transaction remain at less than 1 percent of rural transactions.
Age old cash habits may be another important factor. If you are economically disadvantaged, you may not be benefitted from financial access unless the handling of bank account becomes cheaper and easier to use than the alternatives. The poor infrastructure and the lack of any concrete incentives have really left people nostalgic for cash.
If you keep the services affordable, your trust will rise thus helping draw new people within the formal financial system. The government and also private players must motivate the consumers and the merchants to make the use of cashing alternative payment instrument. If the consumers are digitally aware, the permanence of digital revolution is unstoppable.
Lack of electricity has a huge impact on the demonetization. Rural India is going to suffer a huge setback. The lack of 24x7 electricity access in rural areas is definitely a huge set back to the move of a digital economy.
Indian transaction system is not fully secured. The vulnerability of Indian transaction system has led to the increased cybersecurity. Though it is claimed by the government that the new currency system contains a very high-security feature that is impossible to replicate.
The rural areas are definitely facing a number of problems after demonetization.There has been a shortage of cash in the rural areas. Before demonetization, CMS replenished around 30,000 ATMs. But just after the note ban the daily visits dropped to 80-85% of the pre-demonitization level.
Hence demonetization of the old currency definitely has some positive aspects of reducing the cash flow to the terror organization, better the income tax and indirect taxation and also boosting the digital economy. This is a one-time event and will definitely not have much long-term effect. This is not sufficient to counter black money and also corruption in the country. The whole exercise seems like a carpet bombing rather than a surgical strike, where the majority of citizens are honest and law-abiding thus undergoing unending hardship so as to catch few culprits hoarding black money, also managing to convert the black income into white.



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Arijit Bhattacharyya