As India leads digital payments, consumer experience, safety & innovation are key

As India made a massive transition to a cashless economy riding on cheap internet data, high smartphone penetration and easier on-boarding process, the country’s robust digital payment system is at a growth inflection point, feel industry experts. They believe as India has shown its agility in faster adoption of new technology by driving digitalisation of cash transactions, improving customer experience, providing safe and secured transaction platforms, simplifying processes, creating awareness and most important technological innovations are key.

Even as the economy is emerging from the brutal blow of covid, the year 2022 has begun with a strong rally in digital payments in the first month. Online transactions volumes from tier 2 and 3 cities on private payment gateway during 2021 show growth of 45.6% and 54.3% respectively, according to the Reserve Bank of India (RBI) latest bulletin released in February.

With the economy leaning on new technologies for innovation to improve efficiencies, there are significant risks of safety and security that online transactions may face. So, how is it possible to nurture the ecosystem of multiple payments instruments, along with the bigger adoption of digital payment methods for recurring use cases?

Innovation and agility are key, according to Amitabh Khandelwal, General Manager, Payment & Settlement Systems, RBI. “We have a wide array of payment systems. We have to continue with that. Instead, we can’t say that this is the entire ecosystem and these are the options that are sufficient and now we need not innovate. That is simply not possible,” he said.


PwC India expects the digital payments segment to grow significantly over the next three years in India. “By 2025, it estimates volume and value of digital transactions in India will reach 186 billion and Rs 238 trillion respectively. UPI (Unified Payments Interface) is expected to continue to dominate with a significant majority of transactions,” said Mihir Gandhi, Payments Transformation Leader, PwC India.

Aditya Murthy, Vice President, Digital Partnerships, South Asia, Mastercard concurs. He feels that India’s digital payment system is at an inflection point of growth where the foundation of 10-15 years ahead is getting built for.

Shashank Kumar, Co-founder and CTO, Razorpay agrees that India’s digital payment system is making constant progress in terms of technology while regulations are opening up new markets and new use-case.

“Post demonetisation, a lot more businesses, traditional companies got into digital payments and started looking at their infrastructure afresh. Following the pandemic we have seen a tremendous number of small businesses and traditional businesses flocking to digital payments because their traditional supply chain got disrupted,” said Kumar.

How to improve consumer experience and enhance security?
According to Prashant Sinha, Senior VP-Cards and Payments, Axis Bank for a consumer, experience and security are critical and play a pivotal role. “Security is the moat of digital payment. It’s the moat when we are thinking of a very strong defence, right? Because that’s the launchpad-bedrock-when you want to move fast,” Sinha said.

Khandelwal also echoes a similar sentiment. “Even if I talk of this particular aspect of tokenisation, there is a common point here that its safety and security is paramount, and this is a step in the right direction,” he said. Tokenisation refers to the replacement of actual card details with an alternate code called the ‘token’, which is unique for a combination of card, token requestor and device.

Murthy is optimistic that one month after the deadline, there will be a significant scale in tokenisation. “One month after the deadline, once consent seeking process is over and stabilised, and customers get used to just giving the consent. I think the volumes will start recovering,” Murthy said.

“There is a great innovation. There’s a progressive regulator. There’s a progressive government that is supporting digital payment change. It augurs well for everybody and we should look at the larger picture and not look at the small challenges that might trouble us in the short term. I think the larger picture is great for the country, and I think that’s something we should all celebrate,” said Murthy