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Monday, December 5, 2016

How India is Transforming Towards Complete Digital Payment Ecosystem

Indian GDP is now largely driven by Information technology Services. This is now going to increase when Prime minister Narendra Modi launched big Digitization program in 2015 in large scale. Digitizing all the payment services is a part of Digitization. Government has initiated major programs to  enable digital modes of payments and this is on high priority after demonetization of currency notes.

The global payment landscape is evolving at a rapid pace. The last twelve to eighteen months has further seen the surge in the digital payment landscape due to the following reasons.



  • digital and technological advancements
  • Many non-banking institutions offering payment solutions
  • Customers demanding effective payment modes.


Google and Boston Consulting Group (BCG) have conducted a study to know how digital payment ecosystem is evolving and transforming. The following are the outcome of the study

  • The Mobile internet is expected to reach 3 billion by 2020 as compared to 1.9 billion in 2015
  • By 2020, 80% of internet users will be using data services from mobile handset and out of that 58% will be using smartphone
  • The value of total global retail transactions is estimated to reach to USD 21 trillion as compared to USD 16 trillion in 2015


Four Mega-Trends is Transforming India

  • India is advancing towards digital economy
  • Favorable regulations by government
  • Evolution of New Generation Payment service
  • Prioritizing the customer experience

Digital India

India is transforming into a complete digital ecosystem. This is reflected by huge smartphone penetration, advanced wireless technology, digital banking systems

  • India ranks #2 in the world with over 1 billion mobile subscriptions. 
  • Of that 250 million users use smartphone
  • This is expected to reach to 520 million by 2020
  • With the advent of 3g and 4g, the internet usage has been wide spread even in the villages with 70% of people in village access to the internet using smartphone
  • The National Optic Fiber Network aims to cover 90% of village people under internet access by 2017
  • With these initiatives, the number of internet users will be doubled to 650 million by 2020 as compared to 300 million in 2015
  • Digital transactions are growing at 50% followed by ATM transaction which is growing at 15%. where as the branch transactions is declining at 7% 

Favorable Regulations by the Government:

  • Relaxing KYC requirements for small transactions using digital wallets like paytm, freecharge, mobikwik
  • Exempting two-factor authentication system for transactions made using debit or credit cards
  • KYC using Aadhar
  • Introducing Unified Payment Interface (UPI)

Evolution of New Generation Payment service

  • Many banks introduced digital wallets providing integrated payment solutions. Digital wallets from bank include State bank Buddy, HDFC Payzapp, ICICI Pockets, Axis Bank Lime
  • Telcos also joined the race by introducing digital payment ecosystem which made the transactions much easier for the end customer. Some of these include Airtel Money, Vodafone M-Pesa
  • In 2009, RBI issued Prepaid Payment Instrument (PPI) license to 26 companies. There came Paytm, Freecharge, Mobikwik
  • Keeping in mind, to enable high volume low-value transactions, RBI in 2015 issued licenses to 11 companies to setup payment banks. These include Airtel, Vodafone, Uninor, Paytm, Mahindra Finance-Cholamandalam, India post.

Prioritizing the customer experience

  • Customers in India are now exposed to high-end customer experience provided by the e-commerce players with heavy offers and customer first initiatives
  • Customers are expecting the same level of experience from this ecosystem and the institutions are also getting well prepared to provide what customers expect
  • Heavy discount offers are in areas of recharge, Movie ticket booking, Food ordering and in E-commerce
  • All these factors tend to drive customers more towards digital payment modes
Source: Google-BCG

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