Are Online Transactions Rising in India?

Digital payments in India have only recently seen a major surge. From being a cash obsessed economy to where it is now, the journey has been very interesting to note. If one were to pinpoint any one point of time in the economy during which digital payments use spiked, it would not be wrong to say the demonetization drive gave the online transactions sector a much-needed push. The government as well has taken a lot of measures to encourage people to use more and more digital payment forms. The ‘Digital India’ campaign launched by the Government aims at creating a ‘faceless, paperless, and cashless’ economy.

The increase in the use of online payments can be contributed to their ease of use and the convenience of using them. They are a very good alternative to more traditional methods of payment.

Life After Demonetization

It has been years since demonetization had occurred, but the effect it has had is still massive. The government announced a ban of Rs.500 and Rs.1000 notes from midnight of November 8th, 2016. It resulted in a huge cash crunch across the country. It left people running helter-skelter looking for cash to make their payments. But amongst the entire hubbub, the only thing that shown through were digital payments. Data as per RBI’s website shows a massive spike in digital payments through channels like NEFT using IFSC searched codes of bank branches and mobile banking. The value of transactions done using these methods has more than doubled from before demonetization.

What Helped the Industry?

Multiple factors can be cited as reasons that led to the growth of digital payments in the industry. Some of the factors that do stand out are:

Convenience: You no longer have to worry about to carry around cash in your wallet. It is much safer to use net-banking or digital wallets to make the payments.

Rise in use of Smartphones: Entry of more affordable mobile phone manufacturers has made it possible for everyone to get a smart-phone. Coupled with the affordable mobile data, everyone has access to bank accounts now, right on their phone.

Discounts and Cashback: Many banks and digital wallet providers offer cash-backs and discounts to use their services. One can get more for their money.

Change in Government Policies: Government has introduced many positive changes in policies to make it easier for the digital payments sector to secure a foothold. UPI and Aadhaar based payments are only a few examples of some recent changes.

Change in People’s Mindsets: With smart-phones in hands and the government offering more easily accessible choices to the masses, there has been a distinct change in people’s mindsets towards digital payments. They have become more accepting.

How Does India Pay Digitally?

Debit and Credit Cards from Banks: Cards provided by banks in the form of debit cards and credit cards are widely used. They are extremely convenient to use. One major advantage of using bank based cards is that you can use them to fill up your digital wallets. You also do not need to deal with IFSC search beforehand to make the payments through cards. Just swipe your card, provide your PIN or Personal Identification Number, and make the payment. Some well-known card payment systems are Visa and Mastercard apart from many more.

Internet Banking: Internet banking mainly refers to payments you make by logging into your internet banking portal provided by your specific bank. You can do multiple things using internet banking. You can pay your bills, transfer funds, invest in mutual funds, etc. Funds transferred using internet banking requires you to register a beneficiary by using their account numbers, IFSC codes of their bank branch. You can find IFSC codes by doing a quick IFSC search in the search engine. Internet banking services are available 24x7 all 365 days of the year.

Aadhaar Enabled Payment System (AEPS): AEPS can be used to do basic banking transactions like balance inquiry, withdrawing cash, deposit cash, Aadhaar to Aadhaar fund transfers, etc. All transactions are done with the bank accounts linked with the Aadhaar card. One does not have to visit a bank branch or sign any papers. However, care should be taken to note that this service can only be availed if your aadhaar card has been linked with your bank account.

UPI:UPI stands for Unified Payments Interface and is an immediate payment system where the money is transferred in real-time. UPI has mobile applications that allow you to add multiple bank accounts into your app. You can request and also transfer money 24x7 though out the year. The one major advantage of this digital payments method is that you do not need to add a beneficiary or do an IFSC search. Just add your bank accounts and start transacting.

Mobile Wallet: Mobile wallets are a virtual wallet system. They typically come with mobile applications that are used to fill up with the money from your bank accounts or bank cards. You then use the filled up wallet balance to make secure payments at merchants. You can also receive payments from other digital wallet users too. Some major digital wallets Indians use are Paytm, Freecharge, Mobikwik, etc. You can use the wallet for all your online purchases.

Point of Sale: Point of Sale or POS machines are typically offered at stores for customers to swipe their debit cards and credit cards. The machine reads the card and processes the payment. However, there are multiple varieties of POS terminals: Physical POS, Mobile POS, and Virtual POS. Physical POS are the machines kept at stores while Mobile POS are terminals that work through mobile applications and virtual POS are web-based applications to process payments.

Bharat Interface for Money (BHIM) App: BHIM app allows users to make payments using UPI. They work with UPI to help you make secure transactions. You can link your bank accounts to a BHIM app quite easily. You can make payments to anyone who has a BHIM app too.

Future of Digital Payments

The digital payments industry in India has transformed quite a lot in a short amount of time. More and more new changes are being made to this industry every day. The industry is set to grow by 70% CAGR in the year 2020, and it is estimated that they will be contributing to GDP by 15%. Artificial Intelligence is making its presence known too in this industry. This will help in making the industry more secure, and it will help in fraud prevention. Experts expect mobile payments to increase in volume by 50% when the year 2022 comes around.

Summing it Up!

If you are not using any form of digital payments yet because you are worried about your safety, there is cause to be cautious, but as more and more time is passing, this industry is growing up in leaps and bounds. Government is making sure the industry is safe and secure for all to use. You can test it by trying internet banking offered by your bank. Once you are comfortable with it, you can branch out to other digital payment methods.