Mumbai: Cybersecurity and lack of consumer awareness are threats to growth of digital payments in India, said Dilip Asbe, managing director and chief executive officer of the National Payments Corporation of India (NPCI).
India’s digital payment system would see phenomenal growth as challenges to greater adoption of such payments are addressed gradually, Asbe said.
Stressing that “one-system-fits-all does not work in India, unlike other smaller countries with lesser population", he said that Bharat Bill Pay, National Electronic Toll Collection and the National Common Mobility Card were efforts to fill the gap in Indian retail payment systems. Asbe was speaking on the future of digital banking at the Mint Annual Banking Conclave 2019. Speakers at the conclave spoke on issues being faced by banks and finance companies, and discussed the road map for digital banking and fintech.
“We are sitting at an inflection point now. The next two-three years are going to be crucial. In a cash-driven economy like India, we have to give time to the consumer to graduate to the digital payment systems," said Asbe.
Asbe said that acceptance by merchants and lower penetration of smartphones in India were some hindrances in the digital payment systems in India, which would be gradually resolved over the next few years. He was confident that India is on the right path, but that it would take time to reach the stage that cashless economies such as Sweden, Norway, South Korea and the UK are at the moment. A 2018 Credit Suisse report had estimated the total digital payment market in India to grow to $1 trillion by 2023, led by growth in mobile payments. According to the investment banking firm’s report, digital payments aggregate less than $200 billion, of which mobile was still at $10 billion in fiscal 2018. While digital payment growth is considerably higher in urban areas, rural regions are yet to garner similar high volumes. However, Asbe said that in the last two years tier 2 and tier 3 cities had registered firm growth for Unified Payments Interface (UPI) and card payments. “For online transactions, we have seen good progress in tier 2 and above cities," he said.
Launched in 2016, India’s UPI was designed on the principles of interoperability, consumer choice and forging partnerships between banks and fintechs, and leveraging each other’s strengths.
In 2018, UPI 2.0 was launched, which had a few added features. These include addition of block functionality on the account that is essential for e-commerce transactions.
“By March-end, 30-40 banks will offer block functionality. Now, e-commerce merchants can block the account whenever the consumer receives goods or services; then its account can be debited. Here the merchant has the guarantee that the consumer account is blocked, so he will receive his money. So, it is quite similar to the prepaid model. We will use this functionality for IPOs," Asbe said.