Digital-Journeys: India embraces mobile money
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Bibliographic details
- Authors: Jeff Kearns, ASHLIN MATHEW
- Published: September 1, 2022
Overview
- Title: India Embraces Mobile Money
- Authors: Jeff Kearns, Ashlin Mathew
- Publication: F&D Magazine
- Date: September 2022
- Central theme: The Reserve Bank of India (RBI) played a key role in the rapid expansion of India’s digital payment ecosystem, with particular emphasis on the Unified Payments Interface (UPI) and complementary public digital infrastructure.
Growth of digital payments and UPI
- India’s digital payment volume has climbed at an average annual rate of about 50 percent over the past five years.
- UPI expansion has been about 160 percent annually.
- Transactions more than doubled, to 5.86 billion, in June from a year earlier.
- Number of participating banks jumped 44 percent, to 330.
- Values nearly doubled in the same period.
- UPI was introduced in 2016.
- RBI in March introduced a UPI for feature phones that can potentially connect 400 million users in distant rural areas.
- NPCI genesis dates to 2006, when the RBI and Indian Banks’ Association jointly formed the National Payments Corporation of India (NPCI).
Unique digital infrastructure: India Stack and interoperability
- India Stack: a digital identity and payment system built on an open application programming interface (API).
- Aadhaar national identity program incorporated into services; Aadhaar has 1.3 billion users.
- Open-stack technology is the foundation of UPI and enables rapid integration by private fintech firms alongside public sector banks.
- NPCI described as an umbrella institution for digitalization of retail payments, incorporated as a nonprofit intended to provide India’s people a public good.
Financial inclusion, market players, and user adoption
- NPCI CEO Dilip Asbe projections:
- Growth for individual digital payment users is set to triple in five years to 750 million.
- Merchant users could double to 100 million.
- UPI is described as nearly free today for consumers in India; government provides incentives for promotion of UPI merchant payments.
- Paytm reported users: more than 400 million.
- Example user behavior:
- Entrepreneurs and small businesses use Paytm, Razorpay, and Google Pay for sales and transfers.
- Pandemic accelerated contactless digital transactions, especially for small amounts.
Policy signals and central bank digital currency (CBDC)
- RBI is exploring a central bank digital currency (CBDC) to meet monetary policy objectives of financial stability and efficient currency and payment operations.
- RBI Deputy Governor Rabi Sankar said a digital rupee would have big implications for crypto assets: “CBDCs could actually be able to kill whatever little case there could be for private cryptocurrencies.”
- Expected CBDC advantages cited: currency management, settlement risk reduction, and cross-border payment improvements.
- RBI’s approach: foster a varied ecosystem of payment systems (examples include RuPay, the National Financial Switch, and payment system using the national identity program to reach underserved areas).
Key statistics and dates (verbatim)
- average annual rate of about 50 percent
- about 160 percent annually
- 5.86 billion (transactions in June, year-over-year)
- 44 percent (increase in participating banks)
- 330 (number of participating banks)
- 400 million (potential users reachable by UPI for feature phones)
- 2016 (UPI introduced)
- 2006 (NPCI formation)
- 1.3 billion (Aadhaar users)
- 750 million (projected individual digital payment users)
- 100 million (projected merchant users)
- more than 400 million (Paytm users)
Source: F&D Magazine article "India Embraces Mobile Money" by Jeff Kearns and Ashlin Mathew, September 2022.
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