Augmentation of Digital payment services in rural India.

Objective – This research aims to check the awareness & usage levels of e-payment (digital
payment) services in the rural areas. Recognising awareness levels and challenges faced by
the rural consumers, what initiatives could be taken for education and insemination of the
means.

Introduction / Background:

The basic premise of this research is to look into the factors for inclusion and augmentation
of digital payment services within the rural Indian population.

India is the second most populous country in the world. Though the official figures for census
2020 are yet to be made available, its current population is estimated to be 1.38 billion as per
latest UN data. The country population grew by 17% between 2010-2019, adding over 180
million people. Considering the current trend on increase, it is estimated that India would de-
seat China as the most populous country in the coming two decades.

The Indian demographic distribution is very peculiar. Bombay and Delhi are most densely
populated areas in the country, with 122million and 110.3 million residents respectively. If
we were to add their surrounding metropolitan areas, they house approx. 400 million people
amongst themselves, a staggering 28% of the entire population of the entire nation. Apart
from these two, there are additional 53 cities with a population of over 1 million, taking the
urban population to 455 million, i.e. 33% of the total population (Http://statisticstimes.com/,
2020).

On the contrary, the rural population currently houses the balance 67% of the Indian
population, representing 870million individuals. This population contributes approx. 20% of
the Gross Domestic Product (GDP) of India through agriculture, fishery, forest and allied
services. Though this contribution from rural sector is 3.75 lakh crores, it still lags behind
services and core industries as major contributor (Planning Commission, 2015) .

Post-demonetisation, the digital payment services saw tremendous growth in India.

Furthermore, there is huge discrepancy in adoption and usage of digital payment services in
rural India vis-à-vis the urban. With more than half the population of the nation and vast gap
in use of services, rural India provides an exciting opportunity for digital payment companies
(Sharma, 2019). They could look into building PPP (Public – Private Partnership) models to
build the infrastructure and drive the usage into this demography. Introducing awareness
programs on education of digital payments, investments in payments infrastructure,
increasing internet and smartphone penetration, increasing data consumption, policies to
promote merchant adoption and supportive regulatory policies are required for growth of
digital payments and financial inclusion of rural population.

Literature Review –

Digital payments refer to the electronic consumer transactions, which include payments for
goods and services that are made over the internet, mobile payments at point-of-sale (PoS)
via smartphone applications (apps), and peer-to-peer transfers between private users.

Post-demonetisation, the sector is experiencing an extraordinary jump in growth since

November 2016, up to which the currency circulation was as high as 93%. By February 2019,
digital wallet companies had shown a growth of 271 percent for a total value of US$2.8
billion (Rs 191 crore).

This event also ushered into a new era: it pushed millions of new users onto the country’s
digital economic grid by virtual fiat, transitioning India towards a cashless economy. The
demonetization initiative has been a boon for India’s e-payment providers. Paytm reported a
three times surge in new users- tacking on over 14 million new accounts in November alone.
While Oxigen Wallet’s daily average users increased by 167% since demonetization began.

The initial difficulties of transition have diminished now. More and more people are
beginning to realize the safe and convenient modes of digital payment. Government is
providing last mile solutions along with incentives and measures to encourage people to go
for cashless modes. The whole country is undergoing the process of modernization in money
transactions, with e-payment services gaining extraordinary momentum. Many businesses,
even street vendors, are now accepting electronic payments, prompting the people to learn to
transact the cashless way at a faster pace than ever before. Increased transactions have
enabled people to finally start believing in the power of plastic money in the form of Credit
Card/Debit card, and other channels of electronic payments. Online banking has also gained
prominence due to unavailability of enough cash in the market.

Deterrents to digital payments:

Digital transactions are traceable, therefore easily taxable, leaving no room for the circulation
of black money.

Means:

Listed below are the various online services that allow digital payment of services and bills in
India:

1. Online banking
2. Wallets
3. UPI
4. Plastic cards / Virtual cards
5. Mobile banking
6. App based nearfield (NFC) payments.
7. USSD means (for basic cellphone, using sms)
8. Aadhaar enabled Payment systems
9. Point of Sale (PoS)

Informant set:

Following set of informants, both in rural as well as urban settings.

PROXIMITY TO
GENDE AGE URBAN / DISTANCE
    OCCUPATION   EDUCATION  
R GROUP FROM URBAN
AREAS *
10-18
MALE     WAGERS   ILLITERATE   UPTO 5km
YEARS
18-25 HIGH
FEMALE     SERVICES     >5km - 10km
YEARS SCHOOL
25-40 GRADUATIO
      FARMERS     >10km
YEARS N OR ABOVE
>40
      BUSINESSMEN        
YEARS
HOMEMAKER
               
S
*only for rural informant

Challenges:
 1. Macroeconomic challenges:
a. Habit of using cash
b. Awareness of means
c. Lack of bandwidth & reach of technology (ICT & geographic)
d. Verification, privacy and security of transactions
e. Absence of adequate PoS solutions (Demand / Supply gaps)
2. Consumer Challenges
a. Trust factor
b. Cost of transactions (bank  wallet, wallet  wallet, or vice versa)
c. Smart phone penetration
3. Business Challenges
a. Ease of compliance
b. Absence of adequate PoS solutions (Demand / Supply gaps)
c. Transactional issues (vendor accepting from consumers but business not
accepting from vendors).
4. Social Inclusion / Marginalisation

Bibliography:

Http://statisticstimes.com/. (2020). Population of India.

http://statisticstimes.com/demographics/population-of-india.php

Planning Commission, G. of I. (2015). Sector-wise contribution of GDP of India -

StatisticsTimes.com. Statisticstimes.Com.
http://statisticstimes.com/economy/sectorwise-gdp-contribution-of-india.php

Sharma, S. (2019, December 4). Digital payments boom but rural India in gloom ; banks rope
in Microsoft to take UPI to masses. The Financial Express, 1–3.
https://www.financialexpress.com/economy/digital-payments-boom-but-rural-india-in-
gloom-banks-rope-in-microsoft-to-take-upi-to-masses/1783940/