Digital Payments

The Digital Payments market segment is led by consumer transactions and includes payments for
products and services which are made over the Internet as well as mobile payments at point-of-sale
(POS) via smartphone applications. The following are not included in this segment: transactions
between businesses (Business-to-Business payments), bank transfers initiated online (that are not in
connection with products and services purchased online), and payment transactions at the point-of-
sale where mobile card readers (terminals) are used.

UPI Payments

UPI or unified payment interface works through the mobile. You can either use Mobile apps or USSD
technology. In this method the fund gets transferred between the two accounts immediately. The
system works 24 x7 all days. As of now there is no charge for this payment. To use the UPI payment
method, you have to download the one of the UPI apps. There are scores of UPI apps, such as
Phonepe, Google Pay, SBI Pay, BHIM etc. In the beginning, you have to go through the registration
process. In this process your bank account gets linked using your mobile number. You, have to also
set an UPI PIN for the linked bank account. This PIN is required for making a payment. UPI apps are a
faster solution to send money using VPA or even IFSC and account number. But they have some
limitations also.

You must have seen the QR code in the shops. This payment method is also based on the UPI. The
money is immediately transferred from one account to another. To make payment through the QR
code you must have the UPI App. The app scans the QR code to fetch the details of the merchant.
Once you have the name of the merchant, you can make payment immediately. Thus, in this
method, you pay to a person without knowing the account number, UPI ID or mobile number. You
have to enter the UPI PIN to complete the transaction.

Advantages of Digital Payments

Digital payments are easy and convenient. You do not need to take loads of cash with you. All you
need is your mobile phone or Aadhaar number or a card to pay. UPI apps and E-Wallets made digital
payments easier.

Pay or send money from anywhere

With digital payment modes, you can pay from anywhere anytime. Suppose your close friend’s
mother fell ill at night. He called you at midnight and asked some money. Don’t worry, you can send
money to your friend using digital payment modes such as UPI apps, USSD or E-Wallets.
Written record

You often forget to note down your cash spending. Or even if you note, it takes a lot of time. But you
do not need to note your spending every time with digital payments. These are automatically
recorded in your passbook or inside your E-Wallet app. This helps to maintain your record, track
your spending and budget planning.

Less Risk

Digital payments have less risk if you use them wisely. If you lose your mobile phone or debit/credit
card or Aadhar card you don’t have to worry a lot. No one can use your money without MPIN, PIN or
your fingerprint in the case of Aadhar. But it is advised that you should get your card blocked if you
lost it. Also call the helpline of your E-wallet to suspend the wallet account to prevent anyone from
using your wallet money.

Drawbacks of Digital Payments:

Difficult for a non-technical person

As most of the digital payment modes are based on mobile phone, the internet and cards. These
modes are somewhat difficult for non-technical persons such as farmers, workers etc.

The risk of data theft

There is a big risk of data theft associated with the digital payment. Hackers can hack the servers of
the bank or the E-Wallet you are using and easily get your personal information. They can use this
information to steal money from your account.

Overspending

You keep limited cash in your physical wallet. Hence, you think twice before buying anything. But if
you use digital payment modes, you have all your money with you always. This can result in
overspending.
 Market Analysis of Digital payment
Market Overview

The Digital Payments Market is expected to grow at a CAGR of 13.5% over the forecast period 2020
to 2025. The demand for cashless payments, over cash, is being driven by greater convenience,
favorable government policies, and evolving consumer behavior. The governments are also trying to
reduce their cost of printing the currencies and counter the fake currency influx that disturbs the
economic growth, with digitization, thereby, creating an environment conducive for cashless and
digital payments. Furthermore, the rapid rise in smartphone penetration across emerging
economies, primarily in the Asia-Pacific region, is expected to have a positive impact on the market
growth. Additionally, the introduction of mobile wallets across the world, wherein a consumer is
asked to add money to the application and use it later within, or outside of, the merchant (if
applicable), is rapidly propelling the adoption of digital payment services. The global demand for
smartphones is increasing significantly and with technological advancements such as 5G are
expected to further augment the global smartphone numbers. According to Ericsson, in 2019, the
global smartphone subscriptions stood at 5.6 billion and are expected to reach 7.4 billion by 2025 or
84% of all these subscriptions. This is another major driving force for the market. Additionally, China
is spending highly on payment services. For example, WeChat Pay allows a customer to pay quickly
through in-app service and connected banks and book hotels, flights, trains, and buy movie tickets.
As per ITU, the internet penetration was the highest in Japan, in January 2019, i.e., 93.4%, which is
expected to continue, owing to favorable government norms and associated regulations. Currently,
India has a relatively low penetration rate, as compared to Japan and China. However, this is
expected to increase, owing to the rising smartphone users and government pushing toward digital
payment wallet services.

Facebook, through its WhatsApp application, is trying to offer digital payment services, and already
tested it for mass release by Q4 2019. The number of users and transaction value of Chinese digital
commerce surpassed that of the United States, owing to the Chinese digital payment service
companies forming alliances across the world.

The COVID-19 pandemic has led to enforcement of social distancing, lockdowns and other measures
across regions. This has further led consumers to increasingly depend on internet usage, online
streaming of videos and films, and the most significant change in online shopping.

The global nature of COVID-19 and its impact on e-commerce therefore is likely to encourage
strengthened international cooperation and the further development of policies for online
purchases and supply. The pandemic has made it clear that e-commerce can be an important
tool/solution, especially considering the fact that the e-commerce sales can support small and
medium businesses, that form backbone for certain economies.
 Major Players
PayTM

PayTM, the most common and popular apps among the current millennial generation in India offers
you the option to transfer money into a digital wallet and use it to make payments. It was launched
in 2010 and followed a semi-closed model, which takes advantage of the enormous mobile and
smartphone market. Any, user can use the app to make payments in stores that have tie-ups with
the company. Other uses of PayTM include making bill payments, transferring cash, and avail the
services of travel and entertainment websites. Currently, it is also utilized to make cashless fee
payments in educational institutes.

Amazon Pay

The next entry on our list is Amazon Pay, yet another of the best digital wallet app in India that is, as
the name suggests, owned by none other than the com giant Amazon. It was launched
internationally in 2007 and widely used by Amazon’s massive customer base. Secure and extremely
efficient, you can use it to easily make payments while using the balance in your Amazon account. It
can be used in external merchant websites, as well.

PhonePe

Yet another digital wallet app in India that launched in 2015, PhonePe has been downloaded by
more than 100 million users to date. It can be used to conduct UPI payments, do recharges, and
ensure secure money transfers as well as online bill payments. Since, it comes with a very easy-to-
use user interface, it is one of the most common apps in India.

Yono by SBI

Surprisingly, when SBI launched the Yono application, it turned out to be one of the best digital
wallet apps in India. You can use this software to transfer money to other users and bank accounts.
You can also use Yono to pay your bills, do recharges, make movie bookings, hotel reservations, and
online shopping. It, is a type of semi-closed prepaid wallet that is available in multiple languages and
can even be used if you do not have an SBI account.

Airtel Payments Bank

You can download the Airtel Thanks app on your device to manage your Airtel mobile accounts and
make use of the Airtel Payments Bank and the Airtel Money Wallet. Money added to the Airtel
Money Wallet goes into the Airtel Payments Bank account. It also earns a nominal amount of
interest. You can use the money to shop online, recharge your prepaid account, pay your postpaid
bills, and send money to other people. It also lets you enjoy discounts, cashback, and offers on hotel,
bus, flight, and movie ticket bookings. All payments are secure and require a 4-digit mPIN.