September 5, 2018
Cashless transactions in India have grown at a fast clip and are expected to reach US$ 1 trillion annually by 2025; providing immense benefits for the economy.
India's cashless economy has indeed picked up steam in the past few years, especially with the growth of robust mobile payment gateways and the proliferation of e-commerce in the country. A number of private players like Paytm, FreeCharge, MobiKwik, PayUMoney and Oxigen have emerged and played a key role in growing the overall market. Promotional efforts by these players have strongly incentivised mobile payments, and more and more consumers are hopping on to the bandwagon. The pace of adoption has further accelerated post the demonetisation drive.
The Government of India has also taken important measures to boost digital payments as part of its goal to transform India into a digital economy. The National Payments Corporation of India (NPCI), which is an initiative led by RBI and Indian Banks Association, launched the Unified Payments Interface (UPI) on April 11, 2016. UPI seamlessly manages multiple bank accounts within one mobile application of any participating bank1. This ecosystem that was built under NPCI has certainly caught on with accountholders. In August 2016, the interface handled 93,000 transactions worth Rs 3.1 crore for 21 banks. This has grown to 31.2 crore transactions valued at Rs 54,212 crore and 114 banks in August 20182.
The NPCI also developed the Bharat Interface for Money (BHIM) app, which was launched by the Hon’ble Prime Minister Shri Narendra Modi on December 30, 2016. BHIM provides users with the facility of fast and convenient digital payments using UPI. From the total UPI transactions in August, around 16.5 million transactions amounting to Rs 6,872.57 crore were done through the BHIM app3. According to a tweet by Shri Subhash Chandra Garg, Secretary, Department of Economic Affairs, Ministry of Finance, Government of India, around 100 million Indians are now connected to the digital payments ecosystem.
In a study released in March this year, ACI Worldwide and AGS Transact Technologies further project that digital transactions in India could reach a value of US$ 1 trillion annually by 20254. According to this report, four out of five transactions could be done digitally in India by that year. Key drivers for this shift will be doubling of smartphone users to 500 million, initiatives like UPI ensuring bank interoperability, connected devices (30 billion such devices anticipated globally by 2025), growth in new use cases for digital transactions and spread of digital payments to semi-urban and rural areas5.
The profound ongoing shift to cashless transactions bodes well for the Indian economy in many ways. Since digital payments can be tracked and authenticated, they will help curb black money flow and boost the formal economy. Usage of digital money will reduce the effort and cost pertaining to printing currency notes/coins. Moreover, digital enablement is helping the Government of India ensure Direct Benefit Transfer to beneficiary accounts for its schemes, thereby enhancing financial inclusion. Cumulative savings from DBT to the exchequer since 2013 are projected at Rs 1.25 lakh crore by the end of 2018-196.