A CASE STUDY ON PAYMENT SYSTEMS

Abstract: In its earliest form, Commerce was a system of trading of one item or service for another.
Ancient wall paintings and manuscripts show that humans long ago was engaged in trading animal
skins and meat for other services and goods. Thereafter gradually the idea of currency emerged and in
primitive societies people used shells or beads as money. Then with the advancement of metallurgy,
Gold and silver coins became the standard of exchange around 500 B.C and we see that in
Mesopotamia and Egypt, gold bars were used as cash but they had to be measured each time a trade
was made. Thereafter we see that as both gold and silver coins had a standard value throughout the
globe it helped in trade between countries. Thereafter with the development of the societies throughout
the world better systems of settling transactions developed which led to the development and
acceptance of modern day digital payment systems for settling transactions. In this paper we will study
in details the advantages and disadvantages of adopting digital payment systems and how it had gone
to help in development of India. The present study has been exploratory, casual and empirical in nature
and the data needed for research work has been collected by using both direct and indirect method of
data collection.

I. INTRODUCTION
In 1991 when the World Wide Web was introduced to the world, the world actually had no idea where this new
technology would take us. Now three decades later, it has become almost impossible to visualise a world without the
internet. Information Technology has connected the world in unimaginable ways and has made communication with
any part of the world very easy. In today’s ever busy world it is a relief that instead of wasting one whole day queuing
up in some government office to get a particular work done, one can get it done in few minutes from anywhere just by
having access to a smartphone and the internet and in today’s world we see that technology is in the air, water, food,
education, business, office, electricity, marketing, data storage, communication, travel, banks etc and when we look
arround us we see that some-one connecting with a dear one over the phone, someone talking about a business deal
while the other person is in some other remote corner of the country, someone filling up some application form online,
someone paying his monthly bills sitting right next or someone simply ordering food through their smartphones. Again
today it is possible for various persons to earn degrees through online classes and schools have smart classrooms and
studies are no longer confined to books but are made interesting by YouTube videos and other study portals. Engineering
students who could not make it to the IITs can access lectures of IIT professors through videos. In this way we see that
technology has changed our daily business. One can reduce one’s marketing cost by using online marketing applications.
Today one can sell products on the internet and receive money in the bank directly. One can research the market, analyse
the competitors and learn about technological equipment. Many young entrepreneurs can be seen actively using the
digital platforms for smooth running of their business. In order to properly digitalise this area, the government of India
must ensure proper implementation of various schemes like high speed internet, affordable data etc. Digitisation will
also help restore, conserve and popularise our rich, cultural heritage, whether it is our language, the dialects or our
ancient practices and trades.
The dirtier side of digitisation is that people have become even more exposed to the unsavoury elements on the
internet. The advent of Reliance Jio brought the internet to millions of people across India at an affordable price.
The recent emphasis on digital payments has made many persons move into the digital transactions band-wagon.
Unfortunately this user growth has not been accompanied by user literacy which makes them vulnerable to any number
of attacks, starting from malware to phishing. Cases of cyber bullying and online harassment are also on the rise.
Digitisation can be boon only when optimally and widely used. The digital transformation of a government can be
challenging, but with proper handling, implementation and use, it can be immensely rewarding & can prove to be a
major factor in the progress of a country.
The Government of India has been taking several measures to promote and encourage digital payments in the country
and as part of the ‘Digital India’ campaign, the Government aims to create a digitally empowered economy that is
faceless, paperless, cashless and at present there are various types and modes of digital payments.
Digital Payment methods are often easy to make, more convenient and provide customers the flexibility to make
payments from anywhere and at anytime. These are good alternatives to the traditional methods of payment and speeded
the transaction cycles. Post demonetisation, people slowly started embracing digital payments and even small time
merchants and shop owners started accepting payments through the digital mode. A digital payment occurs when goods
or services are purchased through the use of various electronic medium. There is no use of liquid cash or cheques in
this type of payment method.

II. TYPES OF DIGITAL PAYMENT

Then we will discuss some of the different types of digital payment systems used now-a-days.
1) Banking Cards: Cards are among the most widely used payment methods and come with various features and
benefits such as security of payments, convenience, etc. The main advantage of debit, credit or prepaid banking
cards are that they can be used to make other types of digital payments also. For example, customers can store
card information in digital payment apps or mobile wallets to make a cashless payment. Some of the most
reputed and well -known card payment systems are Visa, Rupay and Master Cards. Banking cards can be used
for online transactions, in digital payment apps, POS machines etc. Bank Pre-Paid card is a type of payment
instrument on which we can load money to make purchases. This type of card may not be linked to the bank
account of the customer while a debit card issued by the bank is linked with the bank account of the customer.
2) Point of Sale (POS): Normally POS terminals referred to those that were installed at all stores where purchases
were made by the customers using credit/debit cards. It is usually a hand held device that reads banking cards.
However with digitisation the scope of POS is expanding and this service is also available on mobile platforms
and through internet browsers. There are different types of POS terminals such as Physical POS, Mobile POS
and Virtual POS. Physical POS terminals are the ones that are kept at POS shops and stores. On the other hand
Mobile POS terminals work through a tablet or smartphone. This is advantageous for small time business
owners as they do not have to invest in expensive electronic registers. Virtual POS systems are web based
applications to process payments.
3) Internet Banking: Internet banking refers to the process of carrying out banking transactions online. These may
include many services such as transferring funds, opening a new fixed or recurring deposit, closing an account,
etc. Internet banking is also referred to as e-banking and used to make online fund transfer via NEFT, RTGS
or IMPS. Banks also offer customers all types of banking services through their website and a customer can
log into his or her account by using a username and password. Unlike visiting a physical bank, there are no
time restrictions for internet banking services and they can be availed at any time and on all 365 days in a year.
This helps in having a wider scope for those who uses internet banking services.
4) Mobile Banking: Mobile banking is referred to the process of carrying out financial transactions/ banking
transactions through a smartphone. The scope of mobile banking is only expanding with the introduction of
many mobile wallets, digital payment apps and other services like the UPI. Many banks have their own apps
and customers can download the same to carry out banking transactions at the click of a button. Mobile banking
is a wide term used for the extensive range of services that can be availed under this.
5) USSD : This is another type of digital payment method, & can be used to carry out mobile transactions without
downloading any App. These type of payments can also be made with no mobile data facility. This facility is
backed by the USSD along with the National Payments Corporation of India (NPCI). The main aim of this type
of digital payment service is to create an environment of inclusion among the underserved sections of the
 society and integrate them into mainstream banking. This service can be used to initiate fund transfers, get a
look at bank statements and make balance queries. Another advantage of this type of payment system is that it
is also available in Hindi.
6) Aadhar Enabled Payment System (AEPS) : Expanded as Aadhar Enabled Payment System, AEPS, can be used
for all banking transactions such as balance enquiry, cash withdrawal, cash deposit, payment transactions,
Aadhar to Aadhar fund transfers etc. All transactions are carried out through a banking correspondent based on
Aadhar verification. There is no need to physically visit a branch, provide debit or credit cards, or even make
a signature on a document. This service can only be available if your Aadhar Number is registered with the
bank where you hold a account. This is another initiative taken by the NPCI to promote digital payments in the
country.
7) UPI : UPI is a type of Interoperable Payment System through which any customer holding any bank account
can send and receive money through a UPI based app. The service allows a user to use more than one bank
account on a UPI app on their smartphone to seamlessly initiate fund transfers and make & collect requests on
a 24x7 basis on all 365 days a year. The main advantage of UPI is that it enables users to transfer money
without a bank account or IFS code. All we need is a Virtual Payment Address(VPA). There are many UPI
apps in the market and it is available on both Android and IOS platform . To use the service one should have a
valid bank account and a registered mobile number, which is linked to the same bank account. There are no
transaction charges for using UPI and through this a customer can send and receive money and make balance
enquires.
8) Bharat Interface for Money(BHIM App) : This BHIM app allows users to make payments using the UPI
application. This also works in collaboration with UPI and transactions can be carried out using a VPA. One
can link his/her bank account with the BHIM Interface easily. It is also possible to link multiple bank accounts.
The BHIM app can be used by anyone who has a mobile number, debit card and a valid bank account. Money
can be sent to different bank accounts, virtual address or to an Aadhar Number. There are also many banks that
have collaborated with the NPCI and BHIM to allow customers to use this interface.
9) Mobile Wallets : A mobile wallet is a type of virtual wallet service that can be used by downloading an app.
The digital or mobile wallet stores bank account or debit/ credit information or bank account information in an
encoded format to allow secure payments. One can also add money to a mobile wallet and use the same to
make payments to purchase goods and service. This eliminated the need to use credit/debit cards or remember
the CVV or 4-digit PIN. Many banks in the country have launched e-wallet services and apart from banks, there
are also many private players. Some of the mobile wallet apps in the market are Paytm, Mobikwik, Freecharge,
etc. The various services offered by mobile wallets include sending and receiving money, making payments to
merchants, online purchases etc. Some mobile wallets may charge a certain transactions fee for the services
offered.
10) Unified Payment Interface (UPI) : UPI or Unified Payment Interface is a Payment solution developed by
National Payments Corporation of India (NPCI), under the guidelines of Reserve Bank of India (RBI ) and
allows the users to send and receive money between the bank accounts linked with mobile number. The sending
and receiving of money are done on a real-time basis and it does not require the IFSC code but instead of IFSC
code both the sender and the receiver needs a VPA or Virtual Payment Address which is like yourname@sbi
or yourname@icici etc. We can create several VPA using BHIM UPI official android app or using any of the
Indian Banks UPI and link more than one bank account, only we have to link the same mobile number or SIM
which we are using in our smartphone with our bank account as the UPI Payments app will verify our SIM by
sending SMS to authenticate the linked bank account before creating VPA. By integrating
the UPI -API, several digital payment apps have been launched in India and even social media sites like Twitter
or Facebook and several popular messaging applications like Hike messenger is also integrating the UPI
platform for sending and receiving quick money on a real-time basis. Thereafter UPI 2.0 has been launched by
National Payments Corporation of India (NPCI) with some new features which are as follows :
1) The overdraft account i.e credit account can be linked with UPI which was not possible previously.
 2) More securely QR code payment by additional signed QR form where no passcode is required at the time of
QR scanning.
3) Pre-authorised Debit mandate to debit the account later which enables banks to create Pay later option at
Payment Gateway.

III. DIFFERENT TYPES OF METHODS HOW UPI PAYMENTS

WORKS
1) QR Code: By scanning the QR code displayed at various merchant stores and confirming the amount by
entering the MPIN in our UPI Payments App. Here as per the latest UPI 2.0 version, we don’t have to enter
the passcode, instead we can use the signed QR & intent.
2) UPA ID : This type of method is used in online shopping stores where first we have to share an VPA ID, then
the stores will initiate the payment process and a notification will be sent to the registered mobile which has to
be confirmed by entering the MPIN in the UPI App.
3) Mobile Number: We can send money to a mobile number linked to any Bank account by sharing MMID.
4) Aadhar Number: Here we can send and receive money by sharing the Aadhar Number linked bank account
where we have to scan fingerprint for transferring money by this process.
5) Sharing Account Number & IFSC: This is a very common method of transferring money between the account
numbers of different banks.
6) Contactless or Audio NFC Technology: The contactless method is the most futuristic and innovative method,
for transferring money using the Audio NFC technology where we do not have to share any VPA Id or have
to confirm any two factors authentication instead an ultra-high frequency sound wave communicates between
the two UPI enabled devices now available only in high end smartphones and matching the wavelength of two
devices can authenticate the money transfer.

3.1 Some other Facts and Features of UPI

1) All the UPI transactions will be completed on a real-time basis.
2) As per the latest RBI guidelines we can interlink all our existent KYC compiled e-wallet account. Though at
present this service has been started by only a few UPI App provider in India, in the future there may be more
UPI integrates interoperability of mobile wallet.
3) Although UPI and IMPS work on the same platforms but UPI is more user-friendly and easy to understand.

3.2 Some Security Measures while Making any UPI Transactions on Mobile 1) Not
to share the VPA (Virtual Payment Address) ID to an unknown person.
2) As the fraudsters are now-a-days using this method to transfer money from the bank account it is advisable not
to authorise any UPI transaction alert on mobile without carefully examining the source on which way the
money is going as, if the message is showing that someone is requesting money then the UPI linked account
will be debited if we accept the request.
3) Not to install any remote access Apps like any desk or team viewer on the smartphone as this may lead to data
siphoning.
4) We should always try to install the trustworthy Apps and should never install any UPI App which is not
trustworthy.

3.3 Some of the UPI Apps are as Follows :

1) Google Pay: Google Pay formerly known as Tez is Number one in this list and is the most innovative and
unique UPI Payments app in India, launched by Google and has more than 45 million active monthly users in
 India. Google Pay is the first UPI app which enabled proximity features(NPC Technology) in its platform.
Google Pay simplified the NFC Technology and introduced a technology which can capture the ultrasonic
wavelength in the Phone’s MIC and speaker (Called Audio QR Technology ). Therefore any smartphone can
be enabled to communicate using Audio QR Technology using ultra high-frequency sound wave. We can also
set up Google Pay for our online business and at present Google Pay has more than 2000 online merchants
partner in India and as of June 2019, Google Pay has 30% of market share in UPI transactions and 2nd largest
after Phone Pe.
2) Phone Pe: Phone Pe is a Bangalore based first UPI Payment platform in India which has now been acquired by
e-commerce giant Flipkart. Phone Pe was partnered with Yes bank to provide UPI payments services in India
and as of June 2019 data, Phone Pe has 54% market share in UPI transactions and also we can link our existing
JIO Mobile e-wallet with Phone Pe App and seamlessly transfer money between these wallets.
3) Paytm App: Paytm Payments & Bank Account is India’s largest digital wallet service provider and most
downloaded UPI app in both Android and IOS platform. Paytm was the pioneer of digital payment service in
India and one of the best UPI app in India and integrates many services in a single App platform and as of June
2019 Data, Paytm Accounts for 12% market share in overall UPI transactions and dominates QR code based
offline transactions market in India.
4) Free Charge Payment App: This is also a very popular UPI money transfer app in India for its several cash back
and in-App discounts and offers and we can add multiple bank accounts linked with the mobile number
registered for the Freecharge App. We can also create Freecharge mobile wallet by uploading some KYC
documents and this Gurgaon based Fintech startup is now acquired by Axis bank.
5) 5% Payzapp by HDFC Bank: Another UPI Payments app cum digital wallet offered by HDFC bank in India
and is also very popular in India due to its numerous cashback offers across different merchant sites.
6) Pockets by ICICI Bank: This is also a Digital Wallet cum UPI Payments app offered by ICICI Bank.
7) Ultra Cash UPI Payments App: Ultra Cash UPI Payments App uses Audio NFC Technology and can be used
to pay our bills by simply connecting our smartphone with another NFC device. This UPI App currently works
in some selected cities in India.
8) Almost all banks have their own UPI Payment App in Google Play or IOS App Store. Some third party
companies also have their own app partnering with any Indian Bank. Some banks have integrated UPI Payments
with their existing mobile banking app or have created now BHIM UPI App. Several internet merchant websites
like Amazon, Ola, Uber are also trying to launch their UPI App in India. Popular messaging App whatsapp has
also cleared RBI’s data localization norms and its UPI Payment APP whatsAPP Pay will come soon.
As per the latest updates Government is trying to make QR code-based Payment System mandatory at all shops,
therefore we might witness many folds increase in UPI Payment System in India’s segment.

3.4 Some advantages of Digital Payment

Some advantages of digital payment are as follows:
1) Faster, Easier and more Convenient: One of the biggest advantage of cashless payment is that it speeds up the
payment process and there is no need to fill in lengthy information's. There is no need to stand in a line to
withdraw money from an ATM or carry cards in the wallet. Also with the move to digital banking, services
will be available to customers on a 24x7 basis and on all days of a year, including bank holidays. Now-a-days
many services like digital wallets, UPI etc, work on this basis.
2) Economical and Less Transaction Fee: There are many payment apps and mobile wallets that do not charge
any kind of service fee or processing fee for the services provided. The UPI interface is one such example,
where services can be utilised by the customer free of cost. Now-a-days various digital payment systems are
bringing down the costs.
3) Waivers, Discounts and Cash Backs: There are many rewards and discounts offered to the customers using
digital payment apps and mobile wallets. There are attractive cash back offers given by many digital payment
banks. This comes as boon to customers and also acts as a motivational factors to go cashless.
 4) Digital Record of Transactions: One of the benefits of digital payment is that all transaction records can be
maintained. Customers can track each and every transaction that is made, no matter how small the transaction
amount is.
5) One stop Solution for Paying Bills: Many digital wallets and payment apps have become a convenient platform
for paying utility bills be it mobile phone bills, internet or electricity bills, all such utility bills can be paid
through a single app without any hassle.
6) Helps to Keep Black Money Under Control: Digital transaction will help the government keep a track of things
and it will help to eliminate the circulation of black money and counterfeit notes in the long run and apart from
this it will also give a boost to the economy as the cost of minting currency goes down.

3.5 Disadvantages of Digital Payments

Some of the disadvantages of Digital Payments are as follows :
1) Security Concerns: Although Stringent measures such as symmetric encryption are in place to make epayment
safe and secure, it is still vulnerable to hacking. Fraudsters, for instance, use phishing attacks to trick
unsuspecting users into providing the log-in-details of their e-wallets, which they capture and use to access the
victim’s personal and financial information. Thereafter we see that without superior identity verification
measures like biometrics and facial recognition, anyone can use another persons cards and e-wallets and get
away without being caught. Those security concerns can make some people reluctant to use e-payment systems.
2) Disputed Transactions: If anyone uses other’s electronic money without their authorisation we can identify the
unfamiliar charge and file a claim with the bank, online payment processor or credit card company, about the
person who performed the transaction, although it can be difficult to win the claim and receive a refund without
sufficient information about the person who performed the transaction.
3) Increased Business Costs: Digital systems come with an increased need to protect sensitive financial
information stored in business computer systems from unauthorised access. Enterprises with in-house epayment
systems must incur additional costs in processing, installing and maintaining sophistical payment security
technologies. Every new and secure method of payment attracts a criminal element seeking to exploit weakness
or to develop new methods of perpetrating fraud.
4) Investment: In order to install digital payment systems everybody needs some investment which has caused
some obstacles in widespread acceptance of digital payment system in India.

IV. OBJECTIVE OF THE STUDY

The main objective of this study is to identify the challenges and prospects of the development of Digital Payment
System in India and its future prospects in India.

V. LITERATURE REVIEW
Joshi Chetanbhai Mrinal, in his paper Digital Payment System : A feat forward of India, attempted to study the trend
in various modes of digital payments like NFS Inter Bank ATM cash withdrawal NACH, CTS, IMPS, AEPS, BBPS,
UPI, BHIM(UPI) and NETC in last three years. The study has found that during the years 2015-2016, 20162017 and
2017-2018 there has been a remarkable growth in digital payment in both value and volume.
Aydin Gokhen in his paper Adoption of Mobile Payment Systems : A Study on mobile wallets, aimed to understand
the factors contributing to consumer attitude development towards and intention to use mobile payment systems.
Bamastak Omaima of Saudi Arabia in his paper, Explorimg consumers acceptance of mobile payments : An empirical
study, tried to establish that mobile commerce and payment are becoming a critical component of the new digital
economy, where mobile devices are being transformed from simple communication devices to payment platforms.
Patil Prakash Pushp, Rana Nripendra, Dwivedi kumar Yogesh in their paper Digital Payments Adoption Research. A
Meta-Analysis for generating the effects of Attitude, Cost, Innovativeness, Mobility and Price value on behavioural
intention, stated that the rapid evolution of mobile based technologies and application has led to the development of
several different forms of Dgital Payment Methods (DPMS) but with limited enthusiasm in consumers for adopting
them.
Shankar Amit, Datta Biplab, in their report, Factors affecting Mobile Payment Adoption Intention : An Indian
Perspective, tried to identify the factors affecting mobile payment adption intention in India by proposing a conceptual
framework based on technology acceptance model(TAM).

VI. RESEARCH METHODOLOGY

The present study has been exploratory, casual and empirical in nature and the data needed for research work has
been collected through both direct and indirect methods of collections of Primary and Secondary Data.
• Direct Method: The study has been based on primary data collection during field visit and the respondents are
those persons who regularly uses various digital payment methods for making payments.
• Interview Method: In order to ensure successful execution of the research work, interviews has been conducted
using questionnaires.
• Indirect Method: A number of newspapers, magazines, journals and websites were also consulted to gather
information related to our study. The primary and the secondary data are examined thoroughly and the results
of the analysis are presented below :

6.1 Findings
6.1.1 Digital Payment Industry in India
From being primarily a cash obsessed economy, India’s digital payment story is new.Driven by progressive
regulatory policies and increased use of mobile internet, Indian payment industry is going through a transformation
phase & till today it is seen that digital payments has started to pick up pace with the growth of e-commerce companies
followed by the emergence of digital wallet companies to lure the consumers. Thanks to the use of attractive offers and
increased smartphone penetration, the digital wallet companies did find their way to the consumer's phone as well as
their pocket.
To expand their reach, the digital wallets started encouraging customers to use them for offline Point of Sales (POS)
transactions too like at shopping malls, supermarkets, grocery stores, restaurants and petrol stations. The POS
transactions are expected to become a majority contributor to the digital payments platform on the coming years which
clearly shows that digital wallets are playing a unique role in driving the growth of digital payments sector.
The other important pillars of the digital payment sector are the online ticketing, Travel and event companies like
IRCTC (Railways), Make My Trip, Yatra, Ibibo, cleartrip( Airlines and hotels), Trivago (hotels ), Redbus (buses) and
Bookmy Show (movie and event ticketing) have got consumers to transact online.
Prior to sudden developments in late 2016 enabling a massive disruption in India’s Payments landscape it was
estimated that India’s digital payments industry would grow to US$ 500 billion by 2020, contributing to 15% of the
country’s GDP. An important driver of this growth is India’s smartphone user base, which is the second largest in the
world. In addition to private actors, the Indian Government has also pushed several Payments apps including the Aadhar
Payment App, the UPI App, and the Bharat Interface for Money (BHIM) app developed by the National Payments
corporation of India (NPCI).
Such apps make it easier to transfer funds in India’s rural community and more importantly will facilitate a
behavioural change towards greater adoption of cashless services. As such, the digital payments industry represents an
attractive Destinations for foreign investors keen to establish a foothold in India. The use of digital payment methods in
India received a major boost after demonetisation in November 2016. According to the National Payments Corporation
of India (NPCI), the value of BHIM Unified Payments Interface (UPI) transactions skyrocketed to Rs 1 trillion while
the volume of transactions reached 913 million.. This report would lead to think that this massive growth of digital
payment methods would lead to a decrease in the use of Cash. However despite all this the cash in circulation as on
June 22, 2018 was only 9.8 percent more than it was in June 23, 2917, which shows that even though there is a greater
appetite for digital payment system, the Indian economy continues to be heavily reliant on cash and this continued
dependence on cash is largely due to the lack of adequate infrastructure.
In the current scenario, digital payment systems are heavily reliant on smartphones enabled with data connections,
NFC, Bluetooth etc. Out of India’s 800 million mobile phone users only 200 million use smartphones and of these only
6 million are NFC enabled and even smaller percentage of users has access to QR code mechanisms. This means
approximately 85% of Indians who do not have access to the infrastructure need to adopt the current digital payment
systems, which are heavily reliant on smartphones.
Thereafter we see that the hardware and software required to adopt the current digital payment infrastructure is bulky
and expensive and so a lot of retailers are resisting adoption of digital payment due to these high cost and in a developing
country, like India, people would rather carry bulky notes than pay extra just for digital payments methods. It is also
observed that past demonetisation 2016, many Indians switched towards cashless methods, which came with a hidden
cost, but as soon as the pressure reduced they returned to using cash.

6.1.2 The Potentials of Digital Payment Industry

The digital payment industry is gaining momentum and is projected to grow at an exponential rate. Presently 81
percent of existing digital payment users prefer the medium over other non-cash payment methods like cheques or
demand drafts. Online shopping, payment of utility bills like electricity, mobile bills, water bills, etc and movie tickets
are the things that an Indian user primarily pays for through digital platform.

6.1.3 Key Drivers for the Growth of Digital Payment Industry

This exponential growth of the digital payment sector is driven by multiple factors including convenience to pay, the
ever-growing smartphone penetration, rise of non-banking payment institutions (payments bank, digital wallets. etc),
progressive regulatory policies and increasing consumer readiness to the digital payment platform.
The convenience to pay along with the availability of lucrative offers are two key factors that has been driving the
growth of digital payments in India. This compiled with the increasing smartphone penetration is proving to be a boon
for digital payments sector and today India currently has third largest internet user base in the world with more than 300
million users. 50 percent of these users connected to internet are playing a key role in the growth of digital payments.
The advent of next generation payment systems like payment banks, digital wallets and Bharat QR is fuelling digital
payments furthermore.
According to the IDC Financial insights report titled : The Future of Payments in India : More Spectaular Growth
Ahead it is projected that digital payments in India will supersede cash by 2022.
Another key driver of digital payments is positive policy framework changes and government initiatives like launch
of new payment systems like UPI, Aadhar Linked Electronic Payments and improvement of the digital infrastructure.
India has now crossed more than 1200 millions active mobile users and mobile payments apps are getting huge impetus
after India Govt initiated several measures to boost digital payment solutions.
After the launch of NPCI’s UPI Payment platform almost all Indian Banks introduced their own UPI Payments App
integrating the BHIM -UPI platform. Therafter there are other companies which have also created their own UPI
Payments App using UPI’s API and partnering with any Indian Bank, and as of April 2019, 144 Banks have already
joined in UPI Payment platform. (Data Source : NPCI & ET).

Worldline India’s Digital Payments Reports : 2018:

1) UPI Transactions : The report finds a huge growth in the use of UPI in 2018 where the total volume of UPI
transactions in 2018 was almost 3.7 billion which is a 769 percent increase from the previous year and in terms
of value it comes to transaction worth of Rs 5.79 trillion which is up by 922 percent from the previous year.
The report also states that the predominant players in UPI are found to be Phone Pe, Google Pay, Paytm and
BHIM and the Apps created by banks such as ICICI, Axis, Kotak, SBI etc.
2) E-wallet Services : As we move on more and more Indians are expected to adopt different forms of cashless
payments and wallets will be high on the list. As per worldline India the number of transactions done by mobile
 wallets in 2018 was 3.98 billion, an increase of 33.4 percent over 2017 while the value of transactions in 2018
was Rs 1.73 trillion, which is an increase of 81.46 percent over the previous year.

6.2 Future Prospects of Digital Payment in India

Prior to sudden developments in late 2016, leading to a massive disruption in India’s payment’s landscape, a Google
BCG report estimated that India’s digital payments industry would grow to US$ 500 billion by 2020, contributing to
15% of the country’s GDP.
An important driver of this growth is India’s smartphone user base, which is the second largest in the world. In
addition to private actors, the Indian Government has also pushed several Payments apps including the Aadhar Payments
App, the UPI App and the Bharat Interface for Money (BHIM ) App developed by the National Payments Corporation
of India (NPCI), which goes on to help easier transfer of funds in India’s rural community and more importantly will
facilitate a behavioural change towards greater adoption of cashless services .
In line with government reforms Prime Minister Narendra Modi has pushed Indians to adopt cashless transactions,
giving the digital payments sector a significant boost. This sector is currently experiencing an unprecedented jump in
growth since early November 2016, with digital wallet companies showing a growth of 271 percent for a total value of
US $ 2.8 billion. This is because of the demonetisation of the Rs 500 & Rs 1000 Currency notes, which represented
approximately 86 percent of India’s cash in circulation.As such, the digital payments industry represents an attractive
destination for foreign investors who are keen to establish a foothold in India.
According to the National Payments Corporation of India (NPCI), the value of BHIM Unified Payments Interface
(UPI) transactions skyrocketed to Rs 1 trillion while the volume of transactions reached 913 million, up from a meagre
7 million in April 2017. One would imagine that this massive growth of digital payment methods would lead to decrease
in the use of cash. However despite all this, the cash in circulation as on June 22, 2018 was 9.8 percent more than it was
on June 23, 2017.
This indicates that even though there is greater appetite for digital payment systems, the Indian economy continues
to be heavily reliant on cash.
In the current scenario, digital payment systems are heavily reliant on smartphones enabled with data connections,
NFC, Bluetooth etc and out of India’s 800 million mobile phone users, only 200 million use smartphones and of these
phones, only 6 million are NFC-enabled, and an even smaller percentage of users had access to QR code mechanisms.
This means approximately 85 percent of Indians who do not have access to the infrastructure need to adopt the current
digital payment systems, which are heavily reliant on smartphone. There is also a dire need for a more interoperable and
universal method of digital payments in the country. Additionally the hardware and software required to adopt the current
digital payment infrastructure is bulky and expensive. A lot of retailers are resisting adoption due to these high cost. In
a developing country such as India, people would carry bulky bank notes than pay extra just for using digital payments
methods. It is observed, that demonetisation pushed Indians towards switching to cashless methods, which come with
hidden costs, but as soon as the pressure reduced, Indians returned to using cash.

VII. RESERVE BANK OF INDIA REPORT

According to the Reserve Bank of India’s report on benchmarking India’s Payment Systems, while India ranks as a
‘leader ‘ in regulation of cost of payment systems, it is categorised as ‘weak ‘ in number of ‘ATMs’ deployed and
availability of alternate payment systems in relation to the share of cheque volume in relation to all payment instruments
including share of card payments or digital payments of all utility bills. When it comes to costs of payment systems,
where the country is a leader, the report said there exists a stipulation that the Merchant Discount Rate (MDR) should
be borne by the Merchant and not passed on to the customer as to promote digital transactions, the Central Government
has been reimbursing the MDR charged on transactions with values up to Rs 2000 made through Debit Cards, BHIM
UPI and Aadhar enabled payment system.
The Reserve Bank has also prescribed the maximum charges that can be levied by banks for transactions undertaken
through National Electronic Funds transfer (NEFT) system and the Real Time Gross settlement (RTGS) System.
According to the Report, India is next only to China in terms of the number of ATMS deployed and it also had a
strong CAGR of 14 percent during the period between 2012 and 2017. While this is good from customer service
perspective, the report opined that it depicts a high demand for cash. The report said that although India has not only
developed a number of alternative payment channels and is only behind China with a decent 26 percent of online
transactions using e-money, but it is far below other developed countries where cards especially credit cards are
predominantly used.

7.1 Weak Category

India’s Share of cheque volume relative to all payment instruments was high at 7.3 percent in the year 2017 keeping
it at the bottom of the pile with respect to the benchmarked countries, while Debit and Crefit Card payments made up
to 29.9 percent of payment systems volume in the year 2017. In terms of volume, however India is moderate with a
strong CAGR and only 3 percent of the population in India used the internet to pay utility bills in the year 2017 therefore
there is a huge scope for increased adoption in this sphere of activity.
India is ranked strong in respect of laws in place and scope of payment systems regulation, cash-in-circulation per
capita and number of Point - of - Sale terminals deployed. India is ranked ‘moderate’ in respect of cash in circulation
as a percentage of GDP, overall payment systems, transactions volume and growth, Debit and Credit card usage at POS
terminals and online.

CONCLUSION
We see that still today although Indian economy is a cash obsessed economy, currently with the programme of
regulatory policies and increased use of mobile internet, Indian Payment Industry is going through a transaction phase
and the next few years will see how money will move in the Indian economy.
Here we can say that digital payment systems has started to pick up pace with the growth of E-commerce companies
followed by the emergence of digital wallet companies to lure the consumers. The digital wallets companies gave
lucrative offers and cash back to get consumers on board using the payment channel. Thanks to the ease of use, attractive
offers and increased smartphone penetration that digital wallet companies could make a mark in the Indian payment
scenario. To expand their reach, the digital wallet companies started encouraging customers to use them for offline Point
of Sale(POS) transactions also at shopping malls, supermarkets, grocery stores, restaurants and gas/petrol stations. The
POS transactions are expected to become a majority contributor in the digital payments platform in the coming years
making digital wallets a unique player in driving the growth of digital payments sector. The other areas facilitating the
digital payment are the online ticketing, travel and event companies like IRCTC ( Railways), Make My Trip, Yatra,
Ibibo, Cleartrips (Airlines and hotels ), Trivago (Hotels), Redbus (Buses) and Book my show ( Movie and Event
Ticketing ) and Payment of Utility bills like electricity, mobile and water bills etc.
Therefore in the end we can say that the exponential growth of the digital payment sector is driven by the multiple
factors like convenience to pay, the ever growing smartphone penetration, rise of non-banking payment institutions

REFERENCES
[1]. Joshi Chetanbhai Mrinal , “Digital Payment System : A feet forward of India”, October, 2017.
[2]. Aydin Gokhen, “Adoption of Mobile Payment Systems : A Study on Mobile wallets “, March 2016.
[3]. Bamastak Omaima, “ Exploring Consumers acceptance of Mobile Payment : An empirical study “, January
2011.
[4]. Patil Prakash Pushp, Rana Nripendra, Dwivedi Kumar Yogesh, “ Digital Payments Adoption Research. A Meta-
analysis for generating the effects of Attitude, Cost, Innovations, Mobility and Price value on behavioural
intentions.
[5]. Shankar Amit, Datta Biplab, “ Factors affecting Mobile Payment Adoption Intention : An Indian Perspective.

SUBMITTED BY

1.RISHIVARMAN
2.ADIL RAHMAN
3.MUHAMMED BAZIL C
4.JUNAID KP
5.RAGUL
6.AMRUTHA
7.SUHAIL
8.BADSHA K
9.RAJESHWARI