What The Future Holds In The Indian Digital Payments Space

Snapshot:

• With e-payments becoming popular, several futuristic reforms are likely to make less-cash, easy transfer concepts more mainstream in India.

Cash is king, but digital is divine. India has built a secure, scalable infrastructure called ‘India Stack’, paving the way for a global digital payments revolution. The rise of tech-first firms has accelerated digital adoption and enabled digitized financial services and cross-selling opportunities.

New Use Cases of UPI

• UPI to drive micro-insurance, retail investments, ed-tech, kirana tech, agri tech, and cross-border services.
• Recurring UPI payments to platforms like Ola, Netflix expected to increase.
• Credit on UPI (like credit cards) could revolutionize digital lending.
• Government planning GST rebate incentives for UPI usage and PAN/GST integration.

Offline Retail Payments & Contactless Tech

• Internet constraints in remote areas are a challenge.
• RBI’s sandbox tests offline payments using USSD codes or wallets.
• RBI increased contactless payment limit to ₹5,000, enabling small-ticket transactions via wearables and phones.
• Metro systems like Delhi and Mumbai may lead India’s contactless transit digitization.

Mass Digitization of Small Businesses

• 13 million Kiranas in India; digitizing even 10% could increase retail consumption by 5% and create 3.2 million jobs.
• Service providers (salons, plumbers) to also be digitized.
• FinTechs targeting Tier 2 and 3 cities with credit-linked payment solutions.
• Better bookkeeping → improved credit access for MSMEs.

Open Banking and Account Aggregators

• India’s credit-to-GDP ratio (51%) is among the lowest globally.
• MSMEs form 90% of Indian businesses but face huge credit gaps.
• OCEN, Account Aggregators, and Public Credit Registry (PCR) to reduce information asymmetry and improve MSME credit access.

Buy Now Pay Later (BNPL)

• India has only 30-40 million active credit cards; BNPL fills the consumer credit gap.
• BNPL is fast, easy to access, and integrates with checkout flows on e-commerce platforms.
• Improved assessment possible via Account Aggregators.
• Globally successful players: Afterpay, Klarna, Affirm.

Internationalization of UPI, Aadhaar, RuPay

• NPCI’s global push: UPI and RuPay are being adopted in 195 countries.
• MOSIP (India’s open-source Aadhaar) is being adopted in Morocco, Philippines, etc.
• World Bank’s ID4D initiative is inspired by Aadhaar.

Public Credit Registry (PCR)

• Will centralize credit information on individuals and corporates.
• Enables formal credit access and reduces reliance on informal debt channels.

AtmaNirbhar App Store

• Indian App Store to counter Google Play and Apple’s App Store dominance.
• Mobile Seva platform to be upgraded; may be pre-installed on new phones.
• Will also be accessible via browser as a PWA (Progressive Web App).

Digital Currency and Blockchain

• RBI exploring Central Bank Digital Currency (CBDC).
• Concerns remain around crypto regulation.
• Blockchain to enable faster, more transparent cross-border payments (compared to SWIFT).

Conclusion

• India aims to build an “AtmaNirbhar Internet” that keeps data value within the country using AI and ML.
• Biometric tech will enable exponential digital payment growth.
• Digitization will formalize the economy, increase tax revenue, and support GDP measurement.
• With just 100 million active digital payment users, the journey has just begun.