During the period 2010-20 India witnessed a staggering growth in digital payments. India practically overtook all countries and recorded a 60% higher use than China which prompted RBI to declare the decade as “the decade of digital payments in India”. 

From being primarily a cash-driven economy, India’s transition to digital transaction. In a short period is remarkable. Progressive regulatory policies, increased use of mobile phones and internet penetration to nearly all corners of the country has offered the Indian payment a transformational business opportunity leading to

growth of e-commerce companies and digital wallet enterprises. In addition, the wide use of Point of Sale instruments for bill payments at shopping malls, supermarkets, grocery stores, restaurants and fuel outlets. Users are also finding digital payments more convenient and has been adopted for online ticketing for travel, hotels, entertainment including making payments for tax and utility services. Introduction of innovative payment systems, the entry of non-banking institutions, and a progressive switch in customer behaviour from cash to digital payments are some of the reasons for this tectonic shift in the nature of financial transactions. 

There are diverse types and modes of digital payments. These include debit/credit cards, internet banking, mobile wallets, digital payment apps,  Unstructured Supplementary Service Data (USSD), Bank prepaid cards, mobile banking, Unified Payments Interface (UPI) Service,  etc.

Credit Lyonnais Securities Asia(CLSA) has forecast that digital payments in India will reach $1 trillion by financial year 2026 compared to $300 billion in 2021.  “While many factors are contributing to the nation’s digital successes, we believe the role of the government, regulators and industry bodies in developing the India Stack provided the foundation for rapid digitisation and innovation.” An interesting angle to India’s digital payment story is that it is going to be dominated by micro transactions (tractions of value lower than Rs 100). In fact, 50% of person-to-merchant transactions are under Rs.100, states a Google-BCG report.                                        

In 2016, Govt of India & RBI jointly rolled out the Unified Payments Interface (UPI) which is an indigenously developed app for providing a secure and interoperable interface for digital payments into a single mobile application to make payments. Currently, 250 banks are live UPI members, which allow interbank fund transfers. Several countries have sought the technology to introduce the UPI system in their economies.

Demonetisation was one of the key events that marked the beginning of a cashless economy.  Since its inception in 2016, the value of monthly UPI transactions crossed  the Rs 3-lakh-crore mark in September 2020 and subsequently more than doubled to Rs 7 lakh crore in 2021 making it India’s most preferred payment method. Presently, UPI comprise 60% of total payments by volume. UPI is the single largest retail payment system in the country in terms of volume of transactions which recorded 14 crore transactions per day in October 2021.                               

The pandemic further contributed to this unprecedented rise as people preferred to transact without having physical contact with the delivery agent. Fintech players such as Paytm, Phonepe and Google Pay have built dominant market shares in UPI payments. There are over 50 UPI apps with, Phone Pe leading the race. Payment gateways help in transactions between merchants and their consumers. New technologies have facilitated making digital payments easy and convenient to use. The government’s initiative to increase financial access by combining no-frill bank accounts, Direct Benefit transfers, Aadhaar and increasing mobile connections have all contributed to the humongous increase in digital payments. 

As e-commerce becomes more popular, the payments industry will see more innovations. With personalisation, customer convenience, and security becoming prime drivers of success in the digital era, banks, and non-banking financial services institutions are rapidly adopting fintech in their operations. New trends in the payments sector include voice-based payments and wearables payments which allow the user to check balance, transfer money while they’re engaged in other activities. There is also a new range of services such as Request to Pay and Pay Later, which are offering ease, control, and flexibility in making purchases or paying bills. With people showing a growing appetite for digital payment solutions, even newer technologies such as Blockchain, DLT, and NUE are becoming mainstream in India.

But scamsters have weaponised these very innovations that make UPI so easy to use. It has been assessed that 50% of all financial frauds are carried out through UPI payments. The ploys of cheating include ‘click to win cashback’ and ‘scan QR code to receive payments’ ‘call customer care executive from a number listed on the internet to report a problem’ etc.

Therefore, as e-commerce business grows, the need for integrating a secure and reliable payment gateway has become imperative.

Security is one of the biggest challenges with digital payments and wallets. Bolstering cybersecurity to enable secure digital payments to eliminate fraudulent activities such as hacking, threats, theft, etc.  is of prime importance. Hardware level security  is also mandatory for a secure digital payment eco system.  Furthermore, secure systems can also trace each transaction easily, thereby offering added security and making it harder for criminals to tamper with payment gateways.

However, cybersecurity awareness amongst users is still not as high as it should be today. Increasing cybersecurity awareness is vital for all users of this technology.

As digital payments become mainstream, it is important for industry to develop trusted apps that auto enable transaction notifications, mandatorily limit transaction value and frequency and encrypt, by default, end to end all personal information. Users on their part need to be conscious of cyberthreats and be vigilant when using digital payments. Several websites provide cautionary advice and host many useful suggestions at their website.

In the end humans are and will remain the weakest link whenever it comes to any cyber attack or breaches. The same applies for digital payment systems as well. Digital payment platforms provide the convenience of smart technology but users must tread with caution.


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