The Success of Digital India

The Success of Digital India

Last updated: Feb, 2024
The Success of Digital India

India's digital ecosystem has undergone an enormous change in recent years. The progressive integration of government services into digital platforms has made grassroots delivery of those services swift and effective. With just one click, citizens can now access these programs and get the help they require in a matter of seconds. The Government of India has consistently increased the number of digital payment transactions as part of its aim to digitise the economy and financial sector. Furthermore, a great deal of work has been done to make financial inclusion a top priority as a vital national objective, guaranteeing that every person has access to financial services. Digital India has set a significant goal of attaining a status characterised by presence-less, paperless, cashless, backed with consent transactions. The Government of India has placed utmost importance on promoting digital payments, aiming to include every segment of the country's population within the formal framework of digital payment services. The ultimate vision is to ensure that all Indian citizens can access seamless digital payment facilities conveniently, affordably, quickly, and securely.

There has been a technological revolution in recent years in India. As part of the Government of India's plan to digitise the financial industry and economy, the number of digital payment transactions has been steadily rising over the past several years. More concentrated efforts have been made to advance financial inclusion as one of the nation's key national goals. One of the key enablers at the centre of India’s transformed digital payment landscape is JAN Trinity- Jan Dhan, Aadhaar and Mobile. Launched in August 2014, Pradhan Mantri Jan-Dhan Yojana (PMJDY) is one of the biggest financial inclusion initiatives in the world. It contributes to providing universal banking services for every unbanked household. The main product of the Unique Identification Authority of India, Aadhaar, is a straightforward but efficient way to validate people and beneficiaries using their biometric data. Together, Jan Dhan accounts, Aadhaar, and mobile connections have contributed to building the groundwork for a Digital India, where citizens may access a wide range of government services directly and with greater convenience without the need for middlemen.

The idea of digital India revolves around achieving faceless, paperless, and cashless status. To promote digital payments to strengthen the Indian economy, the government has been using various initiatives to bring each segment of the country under one-fold digitisation.

The Digital India program is a program of the Government of India (GoI) that was launched in July 2015 with the vision of transforming India into a digitally empowered nation and a progressive economy.

Digital payment is one of its aspects that offers a faster and even more convenient alternative to the conventional payment system. This offers the convenience of avoiding long queues at banks or Automatic Tailor Machines (ATMs) for money requirements. With the arrival of digital currency, there’s less risk involved in handling currency. Moreover, digital transactions help in controlling the circulation of black money by allowing the government to track and monitor all financial activities that are going on. This enables the elimination of counterfeit notes and facilitates better regulation of income taxes. During the pandemic, digital payments emerged as a boon and enabled contactless and safe transactions.

During the last 5 years, various easy & convenient modes of digital payments, including Bharat Interface for Money-Unified Payments Interface (BHIM-UPI), Immediate Payment Service (IMPS), & National Electronic Toll Collection (NETC), have registered substantial growth and have transformed the digital payment ecosystem by increasing person-to-person (P2P) as well as person-to-merchant (P2M) payments. BHIM UPI has emerged as the preferred payment mode of the citizens & has recorded Rs. 803.6 crore (US$ 96.6 million) digital payment transactions with a value of Rs. 12.98 lakh crore (US$ 155.98 billion) in January 2023.

The expansion of digital payments in India and the availability of various simple and practical digital payment options have made life easier for the populace and promoted financial inclusion, business, and economic growth. Contactless digital payment options like BHIM-UPI made it easier for people to distance themselves from one another and for businesses, especially small ones, to continue operating throughout the pandemic.

Some of the benefits of using digital payments are as follows:

It offers an instant and convenient mode of payment. Digital mechanisms like IMPS and BHIM-UPI allow money to be instantly sent to the beneficiary account, unlike cash. Additionally, by utilising the BHIM-UPI mode, a user can conduct a digital transaction through their phone by providing a virtual payment address (email-like address) or their cell phone number, which is easy to recall. Payments are now easier owing to BHIM-UPI, which has made it possible to access various bank accounts with a single mobile app. Citizens can easily receive and make payments using their phones owing to digital payments, which provide anytime, anywhere access to accounts. Individuals who might have been put off by the time and expense of physically visiting a bank branch to conduct transactions can now easily access their bank account online and enjoy all the advantages of joining the official banking system and gaining financial inclusion. With the recent implementation of UPI 123PAY, feature phone users can now conduct digital transactions in assisted voice mode using UPI, promoting financial inclusion and digital transactions in rural regions.

Unlike cash payments, digital payments automatically establish a user’s financial footprint, thereby increasing access to formal financial services, including credit. Banks and other lending institutions can utilise digital transaction histories to make cashflow-based lending decisions for both retail lending and lending to businesses, including small businesses that may face difficulty in getting credit in the absence of verifiable cashflows. The Bharat Bill Payment System (BBPS) offers users a simple, accessible, and interoperable way to pay their bills using a variety of channels, including BHIM-UPI, mobile apps, Internet banking, and mobile banking.  With BBPS, citizens can conveniently pay their bills at any time, from any location.

Earlier cash payments were vulnerable to "ghost" (false) beneficiaries and "leakage" (payments that do not reach the recipient in full), especially when it came to government transfers of social security funds. Benefits are now sent via digital payment methods straight to the target beneficiary's account (direct benefit transfer).

One product that has been dubbed revolutionary in the payment environment is UPI. Since its launch in 2016, it has grown to become one of the most widely used digital transaction platforms in the nation. The National Payments Corporation of India (NPCI) created the immediate payment system known as UPI. It combines a number of banking functions, smooth fund routing, and merchant payments under one roof, enabling numerous bank accounts into a single mobile application.

Currently, considerably over 40% of all digital transactions in India are made using UPI. Small companies and street vendors have benefited as it makes bank-to-bank transfers, even for relatively small amounts, quick and secure. For migrant workers, it also makes swift money transfers possible. The technology is simple to use because it involves no physical effort and enables money transfers with just the scan of a QR code. Because UPI makes it simple and contactless to do transactions, it has also proven to be a lifesaver during the COVID-19 outbreak. As a result, its use is growing quickly. BHIM-UPI has emerged as the preferred payment method among users. UPI has set a new record of processing over 9 billion transactions (worth US$ 179 billion) in May 2023. UPI accounts for 75% of the total retail digital payments in India.

India has witnessed an unprecedented surge in the digital economy and specifically digital payments over the years. Digital payment methods that are easy to use and convenient, like Person-to-Person (P2P) and Person-to-Merchant (P2M) payments, have revolutionised the digital payment landscape. Examples of these methods include Bharat Interface for Money-Unified Payments Interface (BHIM-UPI), Immediate Payment Service (IMPS), Pre-paid Payment Instruments (PPIs), NACH, AePS, and National Electronic Toll Collection (NETC).