Payment Systems in India: Opportunities and Challenges
India is on the path of a major digital revolution. In the era of the digital , the Internet's intensified connectivity has transformed the nature of financial transactions. As a result, India is at the cusp of transformation as we embark upon the next phase towards universal financial inclusion.
A Window of Opportunities for Payments Systems in India
Some of the significant opportunities that abound in payment systems in India are listed below:
Augmenting Internet Usage
In recent times, the internet is an inevitable part of life. Whether we are speaking of rural or the urban population. One of the key reasons is the affordable data packages offered by telecom companies. Even the traditional banking sector is improving its Information and Communication Technology infrastructure to meet enhanced customer expectations, and also to provide modern and innovative banking services at convenience and reasonable prices.
Incentives and rewards are attracting more traction to make digital payments. Also, the central banks are encouraging digital transactions by reducing the transaction cost. Patrons are provided with cash-back offers, rewards, and discounts for making digital payments, motivating and inspiring them to switch to digital transactions.
Initiatives such as demonetization, Pradhan Mantri Jan Dhan Yojna, led to the development of the economy through financial inclusion. Even the unbanked people started opening bank accounts. All the government payments, such as taxes (both direct and indirect taxes), duties, even fines, are also collected by digital mode.
Availability of smartphones at affordable prices and mobile data services at minimum costs influences people to use smartphones. With the help of smartphones and their apps, the number of digital payments is rising rapidly. With technologies like Near Field Communication (NFC) transactions and the option to save debit/credit card details, payments for online purchases, bill payment, and money transfer has been made easy. Both value and volume of online transactions are growing significantly. The services provided by banks like NEFT, RTGS, ECS, IMPS are encouraging people to easily transfer funds from one account to another.
Emerging Trends in Online Shopping
People are influenced by e-commerce features such as anytime, anywhere shopping, the convenience of payment, numerous varieties of products, choice, saves time and energy, and delivery at the doorstep. Urbanization resulting in digital transaction proliferation and amplification of e-commerce is also increasingly contributing to digital transactions.
Accessibility to Various Digital Payment Solutions
The Reserve Bank of India and the Government of India are encouraging the emergence of FinTech startups. They are licensing, regulating, and governing the work of FinTech companies to venture into and develop new digital payment solutions to benefit the and receiver or merchants. Also, licensed money service businesses (MSBs) like N2Xpress are facilitating easy and quick intercountry monetary transactions.
Present-day Stumbling Blocks for Payments Systems in India
Some of the major challenges that hinder the payment systems in India include:
Cash Dependent Economy: The majority of the Indian population is dependent on cash-based transactions. Majorly the rural population feels more convenient and safe in handling cash dealing. Since more than half of the population are below the poverty line, unbanked, unorganized economy. The rural area or deep interior parts of India are uninformed about various payment systems. Even those who know, are afraid of security and privacy issues to proceed with digital transactions.
Lack of Digital Literacy: In India, basically, the literate population is only moderate, and in that, only a meager population possesses digital literacy. A large part of the population remains untouched from the technological advancements and indulges in only cash dealings. Without digital knowledge, there cannot be a transformation to digital transactions.
Limited Access to Technology: In most rural parts of India, they do not have access to good internet connectivity. International networking connectivity and speed are crucial for digital fund transactions. The major reason that interrupts the transaction is the lack of quality and authentic internet connectivity.
Risk of Cyber Fraud and Privacy: Cybersecurity is a major obstacle that affects digital transactions. The cybersecurity issue is challenging the adoption of payments systems. The fear of exploiting privacy and the risk of being hacked acts as a serious concern even for literates.
Remedies to Boost Payments System in India
- People should be educated about modern technology and innovations leading to increased access to the digital world of transactions.
- Internet connectivity should be accessible everywhere with adequate bandwidth and should be available at a low cost.
- The government should strengthen cybersecurity regulations and enhance Information and Communication Technology to avoid fraudulent activities. Immediate actions should be taken against hackers and cyber frauds.
- Awareness programs related to digital modes and usage of apps should be provided, and the government must create trust and build confidence in people's minds.
With the steps taken in the right direction, the future of digital payments in India is highly optimistic.