Concerted efforts by the Indian Reserve Bank to move to a non/less-cash economy by pushing digital payments have begun to pay rich dividends as the volume of such payments has jumped manifold in the past five years, the latest data from the Indian central bank showed.
Between 2015-16 and 2019-20, digital payments have grown at a compounded annual growth rate of 55.1 percent from 593.61 crores in the year to March 2016 to 3,434.56 crore in the year to March 2020. In absolute terms, value has grown from Rs 920.38 lakh crore to Rs 1,623.05 lakh crore during this period, clipping at an annual compounded rate of 15.2 percent.
- Giving year-wise data, in 2016-17 digital payments jumped to 969.12 crores from 593.61 crores in the previous year in volume terms, while in value the same rose to Rs 1,120.99 lakh crore.
- Similarly, the numbers continued to scale new peaks with volume growing to 1,459.01 crores and value jumping to Rs 1,369.86 lakh crore in 2017-18.
- Come 2018-19, the numbers clipped at a faster pace with volume jumping to 2,343.40 crore transactions while the value rose to Rs 1,638.52 lakh crore.
- However, FY20 saw a massive spike in volumes over the previous year to 3,434.56 crores but in value slipped down to Rs 1,623.05 lakh crore, which can be attributed to the steep fall in the overall economy and the massive job losses, forcing people to spend less and preserve more cash.
Yet from a five-year growth perspective, the numbers shine with an annual growth rate of 55.1 percent in terms of transaction volumes and 15.2 percent in terms of value, show the RBI data.
Given the pandemic and the lockdown restrictions, digital payment volumes are set to jump manifold while the value could see a further plunge given the mammoth crisis that everyone faces following the pandemic.
The digital payment push-started almost a decade back with limited access to NEFT, RTGS and ECS payments. Later with the government push following the controversial note ban, digital payments rose sharply.
The development of UPI-based payments as well as app-based payments just pushed the boundaries and has since witnessed the blossoming of a myriad of payment systems, entry of non-bank players, and a gradual shift in the customer behaviour from cash to digital payments.
Some of the initiatives introduced decades ago in payment systems to safeguard the interests of customers are valid even today. Some of the recent RBI initiatives for enhancing security and increase customer confidence in digital payments include mandating the use of only EMV chip and PIN-based debit and credit cards from January 2019; tokenization from January 2019, when RBI issued a framework for tokenization of card transactions which allowed all authorized card networks to offer tokenization services, irrespective of the app provider, use case; facility to switch on/off transaction rights; mandatory positive confirmation to remove any ambiguity for funds transferred through NEFT and RTGS from March 2010, and January 2019, respectively.
Another innovation has been contactless cards that allow cardholders to “tap and go”; mandatory data storage within the country; harmonization of turnaround time for failed transactions from September 2019 and setting up of a digital ombudsman and also the institution of the Central Payment Frauds Information Registry among others.
One of the biggest outcomes of these measures is the massive change in the behavioural trends of customers for instance, as percent of card usage, they are being used increasingly for payments from 20 percent in FY16 to 45 per cent in FY20, with debit card turnover outpacing credit card values.