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Digital Payments Driving the Growth Engine of the Digital Economy
The digital economy is the economic activity that results from billions of everyday online connections among people, businesses, devices, data, and processes. The digital economy is booming. Annual smartphone shipments have more than doubled since 2010, hitting 1.2 billion in 2023. Internet of Things (IoT) devices are projected to surge 2.5 times from 2023 to 39 billion by 2029. (Wikipedia, July 24)
The digital economy provides numerous benefits, which have contributed to its rapid expansion and positive effect on a variety of industries. The major outcome of digital technology is clearly visible in increased productivity, efficiency, and automation in operations and processes, besides reduced costs.
The Role of Digital Payments in Economic Growth
One of the most critical components of digital economy is digital payments. The Digital Payments got a massive push during demonetization and grew further during the pandemic at a brisk pace and shall continue with this growth trajectory in years to come.
Digital payment methods have the advantage of being faster, safer, easier to collect, and less expensive to the business. The dynamic payments ecosystem is expanding and evolving, and the digital payments channels are continuing to grow robustly. In the last few years, this industry has seen many trends and forces that are making India the most exciting payments hotspot in the world.
The robust and fast expanding Internet services and growing numbers of mobile users has been the main catalysts for digital payments growth. India has the second largest mobile user base in the world with a billion connections and excess of 250 million smartphone users, digital payments landscape is poised for rapid growth since smart phones are the major drivers of digital payments.
India’s Digital Payments Landscape
As per RBI chief, India accounts for 46% of all digital payments in the world, and UPI transactions now account for 80% of all digital payments in India. “In 2012-13, there were 162 crore digital payments. This number has grown to 14,726 crore in 2023-24 till February.”
According to a report published by Times of India on 7th April 2024, there has been a rapid increase in payment acceptance channels across India. The number of point-of-sale (PoS) terminals witnessed a substantial 26% growth, reaching 8.5 million by Dec 2023. Interestingly, private sector banks have taken the lead and hold the major share (73%), followed by public sector banks (18%). Even UPI QR transactions also displayed a significant jump of 57% during this period.
The report also highlights the growing adoption of electronic toll collection. The number of tags issued grew by a substantial 45%, indicating a shift towards a more seamless highway experience.
Innovative Platforms Driving Change
UPI
As per Innoviti (one of India’s largest providers of integrated payments technology to leading enterprise brands), the future is to drive both domestic and global growth, leveraging UPI to meet the evolving demands of a dynamic domestic market encompassing more than 300 million merchants and a growing international presence, including traction in the UAE, Singapore, and major parts of Europe.
ONDC
ONDC (Open Network for Digital Commerce) is India’s next big bet after UPI. The open network is reinventing e-commerce to level the playing field between online and offline players. This network enables even little shop owners to be visible to online buyers.
According to Shireesh Joshi, chief business officer of ONDC, a government-backed, not-for-profit entity, whose funders include Quality Council of India, Small Industries Development Bank of India (SIDBI), National Bank for Agriculture and Rural Development (NABARD) and a number of financial institutions including State Bank of India, ICICI Bank and Kotak Bank- They are not trying to be a Swiggy or Zomato-killer or an Amazon or Flipkart-killer but shall definitely create a buzz in the market on account of price differences between these giants of food delivery and ONDC.
Future Outlook
The future of digital payments shall change cash transactions to cashless digital transactions manifold, leading to an ecosystem of cashless societies. India’s robust network of payment service providers and other fintechs is evolving quickly to service the needs of the huge population.Drive Growth with Secure & Instant Digital Transactions!
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Namit
Namit Chauhan is a skilled professional with experience in digital marketing, content creation, and business administration. He holds an MBA in IT & Finance from Amity University and a BBA in International Business. He has demonstrated abilities in developing and executing marketing campaigns, creating engaging content, and contributing to organisational goals.
Frequently Asked Questions
Get answers to commonly asked questions about Amity.
What are digital payments?
Digital payments are when you buy things online without using cash or checks.
How did demonetisation impact digital payments in India?
In 2016, India's move to stop using big cash notes really helped digital payments grow. It made people use less cash.
What is UPI, and why is it important?
UPI stands for Unified Payments Interface. It lets you send money instantly between banks using your phone.
What role does ONDC play in the digital economy?
ONDC, or Open Network for Digital Commerce, helps small businesses sell online. It connects them with people who want to buy things online.
What are the trends in payment acceptance infrastructure?
By December 2023, the number of PoS terminals went up by 26%, reaching 8.5 million. UPI QR transactions also jumped by 57% during the same time
Does AITD offer training on digital payment systems?
Yes, AITD has bespoke training programs. They cover UPI, e-commerce like ONDC, and even blockchain payments.
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