New trajectory of digital payments ecosystem

The Payments Vision 2025 released by the Reserve Bank of India is set to revolutionize the payment ecosystems in the country. The core theme of the new vision 'E-payments for Everyone Everywhere, Everytime' indicate that digital payments will gain new momentum over the next three-and-a-half years. The new vision has six attributes - safe, secure, fast, convenient, accessible, and affordable - e-payment options to be provided to every user. The document highlights that over 26 crore digital payment transactions are processed daily by payment systems in the country, of which Unified Payments Interface (UPI) system itself processes more than two-thirds. This indicates the spectacular transition to the digital payment ecosystem due growing popularity of e-payments. The document further states that the steps taken so far towards enhanced outreach, customer centricity, cyber security and digital deepening would be further consolidated and built upon through the five pillars of integrity, inclusion, innovation, institutionalization and internationalization. Factors listed in the document for rising popularity and growth of digital payment ecosystems include "fusion of sovereign initiatives" in the form of Jan Dhan and Aadhar, besides low-cost mobile and data. There are more than 131 crore Aadhar card holders in the country which has facilitated digital payments by Direct Benefit Transfers (DBT). The DBT has also eliminated the middlemen who used to siphon money from beneficiaries' share during physical payment ecosystem for transfer for benefits to beneficiaries of flagship schemes. Increase in number of mobile phones to 114 crore, including 84 crore smartphones, facilitated digital payments through technology-driven platform for mobile banking, mobile wallets and USSD (Unstructured Supplementary Service Data) based payments as well UPI based payments are also identified as another key factor influencing the payment ecosystem. The RBI vision document attributes the increase of more than 500 per cent in merchants accepting digital modes of payments during the half-year ended September, 2021 as compared to half-year ended March, 2019 and increase of more than 1,200 per cent in case of UPI alone over the same period to "contactless" digital payment gaining popularity during COVID-19 pandemic. "Total digital payments have increased by 216 per cent and 10 per cent in terms of volume and value, respectively, for the month of March, 2022 when compared to March, 2019. On the other hand, usage of paper instruments has come down significantly during the same period, with its share in total retail payments registering a decline from 3.83 per cent to 0.88 per cent in terms of volume and from 19.62 per cent to 11.47 per cent in terms of value," states the RBI vision document about fast adoption of digital payment ecosystem in the country. The Payments Vision 2021 had envisaged to empower every Indian with access to a bouquet of e-payment options that is safe, secure, convenient, quick and affordable, and had set four goalposts of competition, cost, convenience and confidence, it adds, which explain the spectacular growth in digital payments in the country over the last three years despite scepticism gripping a section of the people over the transition to new ecosystem. The new vision sets five "anchor goalposts" of integrity, inclusion, innovation, institutionalization, and internationalization and promises that resilience to operational and security concerns would continue to be at the heart to withstand and recover from the evolving threat landscape. This is expected to build confidence of new users about digital payments being a safe mode of payment, but growing online banking fraud and hacking of bank accounts continue to make a large section of people apprehensive about safety of digital payment systems. Digital financial literacy and awareness campaigns can play crucial roles in improving digital financial inclusion and build confidence and help acquire the skills and capabilities of safely using digital payment systems. The vision document outlines the task of ramping up of the electronic-Banking Awareness And Training (eBAAT) programmes of the RBI for enhancing customer awareness campaigns on safe use of digital payment modes through various media channels.Bringing all criminals indulging in digital financial frauds to book is equally important to raise confidence of digital payment system users about the safety mechanism in the ecosystem. Some of the initiatives proposed under the new vision are: volume of cheque-based payments to be less than 0.25 per cent of the total retail payments; more than three times increase in number of digital payment transactions, reduction in cash in circulation as a percentage of GDP, increase in debit card transaction at Point of Sale (PoS) by 20 per cent, debit card usage surpassing credit cards in terms of value, and increasing the registered customer base for mobile based transactions. The Vision 2025 also states that the need for IFSC (Indian Financial System Code) to make funds transfer shall be reviewed and alternative options with suitable provision for collecting beneficiary bank details shall be explored to make funds transfer simpler and hassle-free for customers. The payments ecosystem is poised for a new growth trajectory.