The Rise of Digital Payments in India After Demonetisation

The Indian government's demonetisation drive in 2016 resulted in a massive push towards digital payments in the country. The demonetisation, which involved the withdrawal of high-denomination banknotes, led to a cash crunch and prompted citizens to adopt digital payment methods.

Since then, India has seen a significant increase in digital payment transactions. According to the Reserve Bank of India (RBI), the number of digital transactions in India grew from 2,80,000 in November 2016 to 40,10,000 in November 2020, an increase of over 1400%.

As per records, our nation has witnessed a remarkable augmentation in digital payments. Mounting government initiatives such as Digital India is playing a crucial role in stepping forward towards digitalization. The government aims to craft a digitally empowered nation that is cashless, paperless, and faceless. Electronic transactions made at the point of sale system to a website e-commerce shopping cart either by using mobile banking or internet banking with the help of Smartphones or debit and credit cards are known as digital payment. Embracing cashless payments has been outstandingly amplified by Prime Minister Mr. Narendra Modi by banning the esteemed value paper money. This decisive move has shown an exceptional enlargement in an online transaction. This chapter aims to demystify the concept of “Digital Payment” in our country.?

The Rise of Digital Payments

The government's push towards a cashless economy and the launch of various digital payment platforms, such as UPI, BHIM, and Paytm, have further driven the growth of digital payments in India. UPI, in particular, has been a game-changer, with its user-friendly interface and the ability to transfer money instantly. The COVID-19 pandemic further accelerated the adoption of digital payments in India. With the need for social distancing and reduced cash handling, digital payments have become the preferred mode of transaction for many.

The growth of digital payments has also brought about several benefits. For example, it has improved financial inclusion by providing access to financial services to the unbanked population and reducing their dependence on cash. It has also made transactions more secure and transparent, reducing the chances of fraud and counterfeiting.

With this fast-rising boom in electronic payment, people are facing both ups and downs of this new wave. Let’s delve deeper and understand its impact on the Indian market.

Upsides of Digital Payments in India:

Convenience: Digital payments eliminate the need for cash and cheques, making transactions faster, easier, and more convenient.

Increased Financial Inclusion: Digital payments have improved access to financial services for the unbanked and underbanked population in India, thereby promoting financial inclusion.

Reduced Risk: Digital payments have reduced the chance of counterfeiting compared to cash transactions, as they are more secure and transparent.

Improved Record Keeping: Digital payments provide an accurate and timely record of transactions, making it easier for individuals and businesses to track their finances.

Increased Efficiency: Digital payments reduce the time and effort required to process transactions, leading to increased efficiency and cost savings.

Discounts & Benefits: Who doesn't love freebies? The digital payment portals provide swarms of discounts and offer on every digital transaction, making this immensely popular among users.

Downsides of Digital Payments in India:

Lack of Infrastructure: Despite the growth of digital payments in India, there are still several regions in the country that lack the infrastructure and connectivity required for digital transactions.

Cybersecurity & Fraud Concerns: Digital payments are vulnerable to cyber attacks, which can result in the loss of sensitive financial information and funds.

Digital Division: Not everyone in India has access to the internet or a smartphone, leading to a digital divide that excludes a significant portion of the population from participating in digital transactions.

Dependence on Technology: Digital payments rely heavily on technology, which can be unreliable and prone to failures.?

Additional Fees: Some digital payment methods may involve transaction fees, which can be a disadvantage for low-value transactions.

The Surge in Digital Payment Scams?

Digital payment fraud and scams are becoming increasingly common with the rise of digital transactions. Fraudsters use various tactics, such as phishing emails, malware attacks, and social engineering, to steal sensitive financial information and funds. Additionally, the anonymity provided by digital transactions makes it easier for scammers to operate undetected. To protect themselves, users must be vigilant and take precautions, such as using strong passwords, verifying the authenticity of emails and websites, and avoiding unsolicited requests for sensitive information. It is also important to regularly monitor financial statements and report any suspicious activity to the authorities.?

How to safeguard yourself from being scammed?

To safeguard yourself from digital payment fraud, you have to be alert and conscious of how scammers and fraudsters are finding newer ways to trap you. Jamtara Seasons 1 & 2 by Netflix have given us an idea on this matter. For general awareness, we have shared some important actionables for everyone around.

Use Strong Passwords: Use strong and unique passwords for all digital payment accounts, and change them regularly.

Verify Sources: Verify the authenticity of emails, websites, and phone numbers before providing sensitive information or making a transaction.

Avoid Public Wi-Fi: Do not use public Wi-Fi networks for digital transactions, as they can be vulnerable to hacking and interception.

Keep Software Up-to-date: Regularly update the software on all devices used for digital transactions, including mobile phones and computers.

Monitor Accounts: Regularly monitor digital payment accounts and statements for any suspicious activity, and report it immediately.

Be Cautious of Scams: Be cautious of unsolicited phone calls, emails, or text messages asking for personal information or money.

Use Secure Devices: Use secure and encrypted devices, such as smartphones with biometric authentication, for digital transactions.

Enable Two-Factor Authentication: Enable two-factor authentication for all digital payment accounts to add an extra layer of security.

By following these steps, you can significantly reduce the risk of becoming a victim of digital payment fraud. Additionally, it is important to educate yourself about the various types of digital payment fraud and scams, so you can recognize them and take appropriate action.

The Future of the Electronic Payment Revolution

We can conclude that the demonetisation drive in India has been a catalyst for the rise of electronic payments in the country. With the government's initiatives towards a cashless economy, the launch of various digital payment platforms, and the impact of the COVID-19 pandemic, digital payments in India are expected to become the new normal in the near future.

India recently celebrated 75 years of Independence and 74th Republic Day and made its impression across the digital payments landscape by offering a wide spectrum of services. “The country has made significant progress and moved to a leadership position in large value payment systems and fast payment systems, which contributed to rapid growth in digital payments,” an RBI report on benchmarking India’s payment system stated.

Commenting on the way electronic payment has taken a leap over the past few years, the report said that several UPI-linked solutions and interfaces could be used to ensure smooth and secure transactions for cross-border payment enhancement, bestowing upon this popular system a truly global status.?

This also highlights that its USP lies in its ‘universality’ and varied use cases across the nation -?

Whether we are paying a roadside vendor or at a shopping mall or something as complicated as cross-border payments, UPI has evolved from a being just a possibility to a preferred approach or a de facto method to pay anyone, anywhere in the country.