Digital Payment: Opportunities and Challenges

Abstract

The Indian digital payment market has had phenomenal growth in recent years, with transaction volumes expanding at a compound annual growth rate (CAGR) of 23%. The introduction of new and innovative payment solutions such as the Unified Payments Interface (UPI), National Electronic Toll Collection (NETC), and Bharat Bill Pay Service (BBPS) has propelled the digital payment sector forward. The emergence of new and creative payment solutions, increased smartphone penetration, a growing need for speedier payment options, and a strong push from the government and regulators to adopt digital channels have all contributed to the growth of digital payments in India. Prior to 2010, the increase of digital transactions was in the single digits. Due to the introduction of speedier payment mechanisms in the country, this figure grew to 28% from 2010 to 2016, and then to 56% in 2016–17 after demonetization. COVID-19 has hastened the transition to digital payment methods. The report describes various challenges from moving to cash based to cash less economy. Internet connectivity, lack of resources, challenges in the banking sector, obstacles for credit card companies etc. are discussed in the report. Integrated solutions are becoming more important to banks and non-banking financial organizations. Banks have transformed digital payments from a cost center to a revenue center and a crucial lever for client acquisition. Financial institutions have increased their efforts to upgrade their payment infrastructure and have begun to offer additional services such as lending, wealth management, microinsurance, and the use of data analytics to provide consumers with more individualized solutions. There are numerous solutions and future opportunities presented in the report.