We have seen that the government has taken many steps towards creating a true Digital India by taking crucial decisions in creating the desired digital payment environment.
India's consumers can be divided into many tiers. Tier 1 approximately comprises of over 100 million people while tier 2 has approximately 200-300 million and tier 3 comprises of 500-600 million termed as the masses. In terms of digital payment eco system, mobile wallets are more targeted towards tier 1 population, Unified Payments Interface (UPI) would serve both tier 1 & 2 while Aadhaar Enabled Payment System (AEPS) caters to tier 2 & 3. The largest segment of people in tier 2 & 3 cities and rural areas use AEPS by linking their mobile number with Aadhaar and also through POS with Aadhaar and debit cards on Micro ATM.
The recent demonetization drive has helped in stimulating the alternative modes of payment available to the customers. Cashless payments do not specifically include payments through mobile wallet application but also comprise of USSD, UPI, Net banking, card payments etc. With such a diverse digital payment system, the basic requirement is to build a strong payment acceptance infrastructure that can not only support payments, but maintain the integrity and security of these transactions very important for mass adoption.
What we expect from the upcoming budget is government's extended support in giving the digital payment system an infrastructure status. We also expect subsidies by Unique Identification Authority of India and National Bank for Agriculture and Rural Development to be extended to payment service providers and BC's in addition to the banks to support large scale deployment of payment acceptance access infrastructure/PoS devices. Further, to support manufacturers of these PoS devices, as the cost of setting up a single PoS device sums up to approximately Rs. 15,000 to 20,000 which needs to be brought down to below Rs. 5000. Currently only 1 million merchants have PoS devices out of a total 30 - 40 million merchant network in the country. The country needs 20-30 million devices to drive AEPS, USSD, UPI and Rupay cards for financial inclusion.
With the proposed launch of One India QR code - a common QR code for making digital payments and in addition to this, "TAP & GO" facility on PoS machines can also be an interesting solution for mobile wallet based payment in the coming future.
As we are moving towards a cashless economy, the number of digital transactions are growing rapidly and for this momentum to sustain, various payment systems must be encouraged in a competitive environment to give best service.
However, there are still challenges around interoperability which pose as a barrier for the overall digital framework. Long term success of digital infrastructure in a country like India could depend upon how well infrastructure operations work along with these technological challenges. Clearly, in terms of Money, be it savings or deposits, people have built an undisputable trust in banking services. With the help of the government, we also aim to build a similar trust of users in the digital payment industry. Consequently, there is an immediate need for creating this payment space more fortified against the frauds.