The adoption of digital payments depends on supply side factors such as robust payments infrastructure, reduced cost of online payments, among others
UPI and wallets are giving stiff competition to debit and credit card based payments
Robust economic growth, higher level of education, greater internet penetration, low inflation and increase in credit to the private sector as a percentage of Gross Domestic Product (GDP) are the key factors that help drive digital payments, the Reserve Bank of India (RBI) said in a report.
“From a policy perspective, our findings suggest that in order to give a robust push to digital payments, it is important to provide a conducive macroeconomic environment and a safe and easy access to digital infrastructure," RBI said in a report titled ‘Drivers of Digital Payments’.
The government and banking regulator has been aggressively pushing for wider adoption of digital payments, especially after demonetisation, to bring in transparency, accountability and convenience in the payments space.
The report pointed out that the wider adoption of digital payments depends on supply side factors such as robust payments infrastructure, reduced cost of online payments, greater financial literacy and innovative schemes to attract customers.
It said initiatives such as instant payments system Unified Payments Interface (UPI), prepaid payment instruments (PPI) such as wallets, expansion of RuPay debit cards through Jan-Dhan accounts and Aadhaar-based direct benefit transfer (DBT) payments popularised digital payments in India.
“The Reserve Bank’s ‘Payment and Settlement Systems in India: Vision 2019-2021’ endeavours to ensure increased efficiency, uninterrupted availability of safe, secure, accessible and affordable payment system as also to serve segments of the population which are hitherto untouched by the payment system," the report said.
The banking regulator pointed out that UPI and wallets are giving stiff competition to debit and credit card based payments, although cards continue to remain an important mode of e-payments.
“The introduction of UPI in 2016-17 altered the landscape of retail electronic payments – the UPI’s share in it increased to 43% within a span of three years," it said.
In August, the number of transactions via UPI hit a high of 918.35 million, worth ₹1.54 trillion, on a par with debit card transactions.
“Although some progress in adoption of digital payments has been evident in India due to these initiatives, the usage of digital medium for payments remains much lower than major advanced and emerging economies," it said.
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