The cashless country envisioned in the Digital India programme of the incumbent government is progressing well. In the last three financial years digital payments in India have doubled from ₹2,326.02 crore in FY19 to ₹4,374.45 crore by FY21.
Today, India has the highest fintech adoption rate globally and is the third largest fintech ecosystem. This seismic shift in digital payments adoption would not have been possible without the efforts of the government, banking regulator, and the innovations happening in the fintech space. RBI’s Payments Infrastructure Development Fund (PIDF) Scheme operationalised on January 1, 2021, is one good example where POS infrastructure deployment was subsidised in tier 3-6 and northeastern states in India. The PIDF corpus currently stands at ₹614 crore and will further increase the adoption of digital payments in India. Financial literacy programs like Digital Saksharta Abhiyan (DISHA) along with the proliferation of smartphones and the continuous expansion of internet infrastructure in the country will further boost digital payments in the coming years.
Here are some of the trends to watch out for in 2022:
1. UPI will continue to drive digital payments adoption
From 21 partner banks in the inception year 2016 to 274 banks live, India’s Unified Payments Interface (UPI) has come of age. Developed by the National Payments Corporation of India (NPCI), as of November 2021 there were a total of 418 crore transactions worth ₹7.68 lakh crore using UPI.
One can expect this UPI growth story to continue in 2022 and beyond as India and especially its young demographic is today preferring to take control of the payment process at the point of sale and use more UPI QR apps to ‘scan and pay’ for their transactions.
2. Watch out for e-RUPI
NPCI’s e-RUPI, a person and purpose specific, one-time contactless digital payment solution has interesting use cases, and the coming year will see more innovation on this front, be it the use of e-RUPI for corporate gift vouchers, processing donations, and even usage by the government for direct benefit transfers.
3. Expect major innovations around feature phone
Empowering India’s nearly 44 crore feature phone users with digital payments acceptance solutions will be integral to the country’s dream of a less cash society. The central bank has already announced a proposal in this regard via its “Statement on Developmental and Regulatory Practices”, released on December 8, 2021. We believe that this proposal to introduce a UPI-based payments product on feature phones, when implemented will further accelerate the adoption of digital payments in India.
4. Full stack banking services for credit deprived SMEs
The banking and fintech space has seen a tremendous transformation. However, with a large section of small businesses not having easy access to banking services due to varied reasons, the gap in the lending network has meticulously curated products/services to meet the rapidly evolving demands of their consumers. Hence in the coming year, we will see more fintech participants providing all the services from lending products to opening an account, credit cards thereby providing merchants an affordable financial service.