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Ministry of Finance

RISE OF A NEW ERA IN DIGITAL PAYMENTS

Posted On: 02 NOV 2021 12:21 AM

Prime Minister Narendra Modi launched BHIM UPI (Bharat Interface for Money - Unified Payments Interface) App during the inauguration of the ‘DigiDhanMela’ on 31st December 2016 and urged the people to make digital payments a habit to transform the country into a cashless economy.The vision of the government is to provide facility of seamless digital payment to all citizens of India in a convenient, easy, affordable, quick and secured manner.Since April 2016, UPI has become synonymous to a rapid digital payment which has seen an exponential growth trajectory to cross over 200 Crore transactions a month.

Objective: To achieve “Faceless, Paperless, Cashless” status is the goal of Digital India.

Platform: A dedicated ‘Digidhan Mission’ has been set up for building strategies and approaches in collaboration with all stakeholders to promote digital payments and create awareness.

Reforms undertaken in digital payments:

  • Banking from anywhere, expanding the base of financial inclusion
  • Subsidy to end beneficiary’s account
  • Use of next-gen technologies
  • Scaling-up the merchant acceptance infrastructure
  • Incentive schemes for customers and merchants
  • UPI referral and cashback schemes
  • Digital literacy and awareness

Payment products and platforms:

NPCI (National Payments Corporation of India) has sharply focussed on bringing innovations in retail payment systems through the use of technology for achieving greater efficiency in operation and widening the reach of payment systems.

The Government’s ambitious drive to shift from a cash-based to a digital economy saw a push in the form of demonetization in 2016.

Some of the next-generation payment platforms developed under the Government’s initiative:

 

Benefits of UPI:

            For Merchants:

  • Secure & convenient payment method
  • Low cost infrastructure - QR code
  • No risk of storing cash & sensitive data
  • No need of storing customers’ bank or financial details
  • Access to large database of customers using UPI payment mode

 

For Customers:

  • Round the clock availability
  • Simple user interface
  • Financial inclusion due to low cost and ease of operation
  • Suitable for payments without exposing account details
  • Creates digital footprints for users

For Banks:

  • Low cost alternative to cash transactions
  • Low merchant onboarding cost
  • Data on transactions enables targeting customers for other financial services.

For Payment Service Providers & FinTech:

  • Open architecture fosters innovation
  • Promotes partnerships with banks & FIs
  • Opportunity to target UPI customers for credit and other financial services

Facts and Figures:

  1. It is noteworthy that total digital transactions which were 1004 crores in FY 2016- 17 have seen exponential growth post the launch of UPI. During FY 2017-18, 106 % growth was witnessed taking the tally to 2071 crore transactions.
  2. In FY 2018-19, UPI accounted for 17% of the total 31 billion digital transactions in the country. The next fiscal year saw UPI’s share rising to more than 27% as it processed 12.5 billion transactions of the total 46 billion digital transactions.
  3. In FY 2020-21, UPI accounted for 40% of the total 55 billion digital transactions. To put these numbers in context, the value of transactions on BHIM UPI amounted to 15% of India’s GDP in FY 2019-20.
  4. In just 5 years, over 100 million UPI QRs have been deployed in the market for accepting merchant payments, from only 2.5 million devices that were accepting merchant payments prior to this.
  5. The benefit of UPI was observed in full glory during the COVID-19 pandemic when UPI served as critical lifeline especially for small and micro merchants. In FY 2020-21, UPI processed over 9 billion contactless merchant transactions with total value over Rupees 6 lakh Crore.
  6. UPI has helped Banks to reduce cash requirements on channels like ATMs and Branches resulting in reduction of operational costs and improving customer experience.
  7. In FY-2016-17 the value of UPI transactions was Rupees 6947 crores and now in FY-2020-21 the value is Rupees 41,03,653crores.
  8. To streamline the foray of UPI into international markets, National Payments Corporation of India has launched its dedicated international subsidiary ‘NPCI International’.

 

Source: PIB E-booklet on Rise in Digital Payments

 

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