A few summers ago, I remember consuming extra calories from
sugar candies or purchasing random things just because the store went out of
enough change. Today, the street hawker at your doorstep will tell you “Paytm
Karo” or show you his UPI barcode. Imagine those days when people would
physically carry a large amount of cash while traveling or going shopping.
There was a time when people used to have secret pockets to keep all those
extra cash. Cash was replaced by cards and now, you need nothing but your
mobile phone.
“It is necessity and not pleasure that compels us.” ― Dante
Alighieri, Inferno. Who can understand this
better than an Indian who had spent hours in long queues outside ATM to finally
realize that he still can’t buy two packets of milk and bread with a 2000 rupee
note? Consumers randomly purchased items to get their 2000-rupee notes
exchanged. Paytm was the simplest answer to all the problems of demonetization
and became an overnight star. It went from 125 million wallet customers before
demonetization to 185 million just three months later.
Development in India’s digital payment space started in 2004
with the launch of the National financial switch. It was designed and developed
by the Institute for Development and Research in Banking Technology (IDRBT) in
2004, with the goal of inter-connecting the ATMs in the country and
facilitating convenience banking.
Intending to provide regulation and supervision of payment
methods in India, the Payment and Settlement Act System, 2007 came into force
from 12th August 2008. In December 2008, the National Payments Corporation of
India (NPCI) was founded. It is owned by a consortium of major banks and
promoted by the Reserve Bank of India, created for operating retail payments
and settlement systems in India.
NPCI later felt the need for a real-time money transfer system
and launched Immediate Payment Service (IMPS) in November 2010. It is a mode of
immediate/real-time interbank electronic fund transfer system available for the
general public 24x7x365 days. Nachiket Mor committee recommended the formation
of a new category of the bank called payments bank in 2014. Bharti Airtel set
up India's first payments bank, Airtel Payments Bank. These banks can accept a
restricted deposit, which is currently limited to ₹200,000 per customer, and
can issue ATM cards or debit cards and provide online or mobile banking.
National Payments Corporation of India (NPCI) also developed
Unified Payments Interface (UPI), facilitating inter-bank peer-to-peer (P2P)
and person-to-merchant (P2M) transactions and was officially launched in 2016.
India became the world's largest real-time payment market with the exponential
growth of UPI. In December 2019, Google taking the UPI model into account
suggested US Federal Reserve Board to build FedNow, a real-time payment system
for the United States. UPI has changed the way we make and receive
payments.
To enable hassle-free cash transactions at toll collection
points and reduce the long queues due to the manual toll collection, FASTags
were set up as a key project in the Golden Quadrilateral between Ahmedabad and
Mumbai in 2014. It is an electronic toll collection system, based on radio frequency
identification (RFID) technology and operated by the NHAI. It is affixed on the
windscreen of vehicles. Both banks and payment banks issue FASTags. It also
helps in reducing fuel consumption, hence helps to save money and the
environment. From February 15 midnight of 2021, FASTag has been made mandatory
for all motor vehicles with at least four wheels. Any vehicle not fitted with
FASTag or without valid, functional FASTag shall pay a fee equivalent to two
times the fee.
With the vision of one nation, one card system, the Ministry of
Housing and Urban Affairs of the Government of India launched National Common
Mobility Card (NCMC) on 4 March 2019. It is an inter-operable transport card that
can be used to pay for travel, toll duties (toll tax), retail shopping, and
withdrawing money. It is a part of the Make in India project and is enabled
through the RuPay card mechanism.
Digital payment space has not only made transactions easy and
safe but has also helped Government to easily track and record transactions.
Digital India campaign launched on 1 July 2015, by the Indian Prime
Minister Narendra Modi, has geared up digital payment space. As it
continues to make our lives easy, there are a certain group of people who still
struggle to learn these new trends. India is a country where still millions of
people lack access to banking facilities, which is a major blow to the concept
of digital payments. Credit and debit card frauds are still a very common
scenario, where people even fall prey to fraudsters by making the silliest
mistake of sharing their OTP and PINs. Digital payments are the future of
transactions but the emphasis should be laid on solving the grassroot
problems.