By Avinash Luthria
If there is one sector that has transformed immensely in the last few years, it is the digital payments industry. It has brought in efficiencies and provided a multiplatform approach to sectors like banking, utility, benefit and subsidy transfers, retail etc. The aim has been to make the payment experience smooth and simple, while making businesses more efficient and less dependent on cash. The means through which one can pay has also grown from physical cards and cheques to QR codes, UPI (Unified Payments Interface) and contactless payments.
The abundance of payment methods is not just a sudden occurrence after demonetization. Some have been there for a few years while some saw a growth spurt after 2016. It does not ring the death knell for more “traditional” methods like cards either. Credit and debit cards have been around for decades and continue to be heavily used for cashless payment. Even in developed, mature markets like Europe, different methods like cards, NFC (near field communication), QR codes and e-wallets continue to coexist and serve different customer needs and segments. In India too, new modes like wallets, UPI and the like have merely expanded the digital payments pie.
The digital payment scenario in India today may look a bit confusing and overwhelming with so much going on. But take a step back and you realize that it is only the instrument type and form factor that make up a payment. Payment instruments are essentially of two types — debit and credit. Debit instruments allow one to spend from an amount already stored in an account or prepaid instrument while credit instruments provide a facility to spend through borrowing from an institution on certain conditions for repayment. These are manifested in the forms of card payments, internet banking, mobile wallets, prepaid cards, UPI, QR codes etc. The payment then happens through devices like mobile phones, computers or POS terminals.
India is fairly equipped in terms of infrastructure to handle voluminous transactions that happen through digital channels every day. After demonetization, payment service providers have built capacities, so much so that we are safely future proofed to handle millions of transactions and peak volumes. Acceptance infrastructure of POS terminals and QR codes continue to grow and enable digital payments everywhere. As payment systems evolve and grow, the scope for electronic payments is bound to grow in tandem, as a result of which consumers will move from small ticket retail payments to making large ticket purchases through cards and other digital payment mechanisms.
(Avinash Luthria is Business Head, Financial Processing & Licensing, Worldline South Asia and Middle East)
