India: Leading The World's Digital Payments |
| Credit: Fortune India |
What Are Real-Time Payments (RTP)?
• RTP, as known in the USA or as UPI in India are payments that are initiated and settled nearly instantaneously. A real-time payments rail is the digital infrastructure that facilitates real-time payments.
• Generally, real-time payment networks provide 24x7x365 access, which means they are always online to process transfers, including weekends and holidays.
• RTP/UPI integrates multiple bank accounts into a single mobile application, merging several banking features, smooth funds transfer & merchant payments under one umbrella. One of the most popular third-party apps of late has been Google Pay which even rewards users for every transaction.
Recent Developments
• A report by The Economist Intelligence Unit (EIU) shows that India is leading the real-time payments markets, with 25.5Bn real-time transactions in 2020, followed by China and South Korea.
• Another report by FIS Global shows that real-time activity has further improved in the country with the transaction value increasing by 80% and a growth of around 213% in the number of processed real-time payments, leading to India handling 41mm real transactions a day.
• As per the report, COVID 19 forced economies across the world to modernize their payments systems in order to support commerce and economic growth. India offers a prime example of this shift.
• Although India's population remains largely rural and, therefore, still reliant on cash transactions, the pandemic has lifted digital payments, in terms of both volume and value, to heights far beyond the expectations of the policymakers who facilitated their adoption, the report says.
• "India continues to innovate with the launch of extensive business services on real-time rails, including IPO subscription, mandate management, and invoice-in-the box," the report said.
• The current pandemic has highlighted the critical importance of instantly getting funds in the hands of those who need it, whether individuals or businesses," said Raja Gopalakrishnan, head of Global Real-time Payments, FIS.
Factors Behind The Growth
• Experts believe that India's drive towards RTPs has been successful because of the enabling policy framework and supportive regulation. The RBI has encouraged the use of QR codes for merchants and RFID tags for toll gates.
• The Indian govt has been extremely enthusiastic in promoting digital currency. They have come up with various apps and campaigns for the same. Demonetization has been a critical step in favor of digitization.
• Another factor is the prevalence of low-value payments in the Indian economy leading to the highest real-time transaction volumes in the world, a trend visible in developing countries. The rewards of this are numerous, most notably in terms of wider financial inclusion.
• Other factors are the easier availability of the internet and affordable smartphones and consumer demands for faster payments to save time.
The Future of RTPs
• It is estimated that India alone would have yearly digital transactions worth $1 trillion by 2025. India's smartphone usability will double by 2022 and reach up to 600 million.
• Banks are extensively investing in RTPs to integrate faster payments into existing offerings. Corporates are already adapting to the global trend. Considering this and much more, India seems to have a very promising future of real-time payments.
• However, the success of RTPs depends on how quickly and efficiently a global standardization of the ecosystem is brought about. The kind and variety of RTP-related benefits that customers can access, is also a major factor.
• Consumers are choosing instant, effortless, and mobile payments solutions, where available. Delivering such a system at the national level requires a keen focus on a robust infrastructure and seamless experience without compromising on security or privacy.
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