Pay’tech’ments: The Evolution of tech-driven payment ecosystem in India

India has been taking several steps to expand its technological infrastructure in recent years. The nation is not only promoting tech-driven processes, it is also creating a conducive environment for technological businesses. Digital India, Startup India, and Smart Cities Mission are some of the few upshots of this approach.

The biggest breakthrough in the Indian Financial Sector recently was the launch of NPCI’s Unified Payments Interface (UPI) back in April 2016. The indigenously developed real-time interbank payment mechanism has multiple advantages. It can settle payments round the clock and even during bank holidays. UPI-based payments are also the most cost-effective remittance solution with just 10 paise charge for payments up to Rs. 1,000 and 50 paise for payments worth more than Rs. 1,000 (according to the latest notification by NPCI). These charges are further incurred only by the banks and are free for the end-users.

The rise of UPI in India rapidly catalysed digital payments throughout the country. As per RBI’s annual report 2018-19, UPI-based transactions have already overtaken the debit card payments last year. The report revealed that 5.35 billion UPI-based transactions were conducted in 2018-19 as compared to 4.41 billion debit card payments. In the year 2017-18, these figures were 915.2 million (for UPI) and 3.34 billion (for debit card transactions) respectively.

At the same time, India has taken an all-encompassing approach towards its technological infrastructure. The nation is developing IndiaChain based on blockchain technology. For the uninitiated, blockchain technology – which is the underlying technology of cryptocurrencies such as Bitcoin – creates an infallible ledger system that cannot be altered with. The technology has widespread use cases including quicker financial settlement and smart contract enforcement. The development of IndiaChain will specifically empower India’s emerging fintech sector and enable them to create more evolved products.

At present, the blockchain technology is leveraged by several fintech players. It is also helping process secure transactions across less-digitized geographies including rural regions. Many fintech platforms are driving digital empowerment towards these regions through innovative models such as All-Time-Cash (ATC) vans and blockchain-based kiosks.

India is also trailblazing product innovation. Various regulators including SEBI, IRDAI, and RBI have launched a Regulatory Sandbox for precisely the same reason. It helps fintech platforms to save both cost and time by testing new products and services in a controlled regulatory environment without waiting for approval. The government committee for RBI specifically highlighted the need for innovations in blockchain and Distributed Ledger Technology (DLT), given its applications in several financial and non-financial domains.

Fintech markets in UK and Singapore have an open API culture that allows anyone to plug in APIs easily and empower innovative solutions. With NPCI’s UPI (Unified Payments Interface), Aadhaar API, GSP (GST Suvidha Provider), and Blockchain, India also on the same track. The liberal financial data access alongside subsequent data-driven innovation is helping us inch closer to a liberal and high-growth economy with lower financial leakages.

All of these developments add a considerable thrust to the ongoing fintech operations in our country. The increasing penetration of digital technologies is further amplifying data generation and further improving the efficiency of our financial sector. As much the Gordian knot that our nation as a market is, the inherent diversity as well as technical difficulties – including low digital adoption, the relative absence of data and infrastructure, etc. – are giving rise to pioneering fintech models. These difficulties are in fact opportunities in disguise. They will sooner or later help us in scaling such products and services in other developing and undeveloped nations.

Clearly, India and Indian Financial Sector have an upper hand against its Western counterparts. With rapid infusion of technology, the nation is gradually becoming a force to reckon with at a global scale. We just have to wait and watch till we eliminate our own bottlenecks and financial leakages and then, help other nations in doing so.