Digital Payment Ecosystem

The Payment and Settlement Act, of 2007 defines digital payments as any transfer of funds that a bank does to debit or credit an amount from our bank account electronically.

Modes of Digital Ecosystem Payments:-

1. NEFT- National Electronic Fund Transfer

2. RTGS- Real-time gross settlement

3. IMPS- Immediate payment service

4. Cards including Credit & Debit

5. UPI- Unified Payment Interface

According to some statistics Cards and UPI carry out around 50% of volume transactions

While NEFT & RTGS carry out 53% of value transactions.

Further, Digital per capita transactions have increased in our country from 2.38 transactions in 2014 to 22.42 transactions in the financial year of 2019. Hence, we can figure out a 10x increase in digital payments.

The advantages of making Digital Payments are:-

1. Financial Inclusion

2. Convenience and hassle-free process

3. Secure transactions

4. Incentives such as cashback & rewards

5. Eliminates counterfeits- Macro-economy

6. It helps in making our economy less cash-dependent.

Challenges Involved are:-

1. Technological- As many times we see we face delays in processing and payment transactions, due to technological glitches.

2. Security- As we know digital payments are under the constant threat of cyber crimes and it poses frequent risks of data theft.

3. Lack of Digital Infrastructures- As small service providers do not have enough resources to invest in digital payment infrastructure. Small service providers do not have enough resources to invest in digital-under payments.

4. Lack of Digital Literacy- According to National Statistical Office data, only up to 4.4% of rural and 23.4% of urban households have computer facilities and knowledge of the same.

5. Transaction Charges- Digital payments are subjected to implicit transaction charges.

Initiatives to promote Digital Payments:-

1. Payments & Settlement Act 2007

2. Rationalization of Merchant Discount Rate (MDR)

3. Payments Infrastructure Development Fund (PIDF)

4. DIGISHALA

5. Vittiya saksharta Abhiyan

Need of the Hour:-

1. Tackle Disruptions

2. Improve Compliance

3. Data protection

4. Effective dispute redressal

5. Cash-less economy

Further Steps Required:-

1. Standardization

2. Awareness & Education

3. Internet penetration and accessibility

4. Initiatives & Rewards.

DigiDhan Mission

The Digital India Programme envisions transforming India into a digitally empowered society and knowledge economy by making available digital governance and digital services to every citizen. The promotion of the digital payments ecosystem is an essential aspect of the Digital India program and has the potential to transform the Indian economy by extending inclusive financial services.