The demonetization policy in India had a significant impact on the country’s economy, but it

also accelerated the growth of digital payments in India. Prior to demonetization, digital
payments accounted for only about 10% of all transactions in India, but that number has grown
to over 20% in the years since[1]. On November 8th, 2016, the Prime Minister of India, Sh.
Narendra Modi, announced that all 500- and 1,000-rupee notes, which accounted for 86% [2]
of the cash in circulation, would be demonetized. This strategic movement actually led to
aggressive promotion and adoption of digital ecosystem in India.
The growth of digital ecosystem in India has been driven by a number of factors, including the
government’s push towards digitalization, an increase in internet and Smartphone penetration,
and the rise of e-commerce. The Indian government has been actively promoting the use of
digital technologies through various initiatives such as Digital India, Make in India, and Startup
India. These initiatives aim to increase the use of digital technologies in various sectors such as
healthcare, education, and agriculture, and also to create a conducive environment for start-ups to
flourish. The increase in internet and Smartphone penetration in India has also played a major
role in the growth of the digital ecosystem. According to a report by the Internet and Mobile
Association of India, the number of internet users in India is expected to reach 800 million by
2023. This increase in internet users has also led to an increase in the number of mobile wallet
users in India, which is expected to reach 900 million by 2025[3].
With government’s mission to target 2,500 crore digital transactions in 2017-18 Union Budget
through UPI, USSD, Aadhar Pay, IMPS and debit cards for promoting digital payment
transactions in the country, this has been a significant step towards the government’s goal of
increasing the use of digital payments and reducing the dependence on cash transactions. Digital
payments have become increasingly important in India in recent years, as the country has seen a
rapid increase in the adoption of Smartphones and internet access. This has led to a significant
increase in the use of digital payment methods, such as mobile wallets, UPI, and card payments.
However, there is still a large proportion of the population that relies on cash transactions, and
the government is looking to change this by promoting the use of digital payments. This will be
used for a variety of initiatives to promote digital payments. One of the key initiatives will be to
provide incentives for merchants to adopt digital payment methods. This may include subsidies
for merchants to purchase point-of-sale terminals, as well as tax incentives for businesses that
adopt digital payment methods.
The government’s contribution for digital payment transactions is a significant step towards
achieving the goal of a cashless society. This allocation will help to increase the number of
people who use digital payment methods, which will in turn help to reduce the dependence on
cash transactions. Additionally, the government’s initiatives to provide incentives for merchants
and to build infrastructure to support digital payments will help to create a more conducive
environment for digital payments to thrive. This move will also help to increase the overall
financial inclusion in the country and will bring more people under the ambit of formal banking
and financial services. With the increasing adoption of smart phones and internet access, digital
payments are becoming more accessible to more people. This allocation will help to further
increase the use of digital payments and reduce the dependence on cash transactions, which will
help to create a more efficient and secure financial system for all Indians
The digital payments ecosystem in India has also grown significantly in recent years, driven by a
combination of government initiatives, an increase in internet and smartphone usage, and the rise
of e-commerce. One of the key initiatives is the launch of the Unified Payments Interface
 (UPI), which allows for real-time inter-bank transactions, and the Bharat Interface for Money
(BHIM) app, which simplifies the process of making digital transactions.
UPI (Unified Payments Interface) has seen significant growth in India since its launch in 2016
by National Payments Corporation of India (NPCI). Here are some highlights of the UPI journey
in India with YoY (Year-on-Year) growth statistics till Jan 2023[4]:

 In 2017, UPI recorded a YoY growth of 900%, processing over 100 million transactions worth
INR 67 billion.
 In 2018, the YoY growth was 246% with transactions worth over INR 1.5 trillion processed.
 In 2019, the YoY growth was 67% with transactions worth over INR 2.9 trillion processed.
 In 2020, UPI recorded an YoY growth of 63% with transactions worth over INR 4.3 trillion
processed in December 2020.
 In 2021, the YoY growth was 72% with over 1.49 billion transactions worth INR 5.6 trillion
processed in June 2021[5].
 At the end of the calendar year 2022, UPI’s total transaction value stood at INR 125.95 trillion,
up 1.75 X year-on-year (YoY), as per the NPCI. Interestingly, the total UPI transaction value
accounted for nearly 86% of India’s GDP in FY22[8].
 At the end of the calendar year 2023, UPI’s total transaction volume stands on 83.75 Billion.
These statistics showcase the increasing popularity and adoption of UPI as a convenient and
secure platform for digital transactions in India.
The increase in internet and smartphone penetration in India has also played a major role in the
growth of the digital payments ecosystem. E-commerce has also been a major driver of the
growth of the digital payments ecosystem in India. The e-commerce market in India is expected
to grow at a CAGR of 31% and reach $200 billion by 2026[6]. The growth of the e-commerce
market has led to an increase in the number of online shoppers in India, which is expected to
reach 220 million by 2025. The digital payments ecosystem in India is also supported by a
number of other private players as well. These players offer a range of digital payment services
such as mobile wallets, UPI payments, and QR code-based payments.
 With the aggressive stakeholder consultation with Ministry of Finance and Reserve Bank of
India, it was envisaged that there are 16 different digital payment modes which are as follows:

Another major achievement of the DigiDhan Mission has been the creation of a digital
infrastructure for financial transactions. The government has implemented a number of
measures to promote the use of digital payments, including the launch of the Aadhaar-enabled
The DigiDhan Mission has also aimed to increase the number of digital transactions in India. The
government has set a target of 25 billion digital transactions by March 2018, which was
exceeded with 40 billion digital transactions. The government has also launched several
initiatives to promote the use of digital payments in rural areas, including the launch of the
Common Service Centers (CSCs), which provide digital services to citizens in rural areas.
DigiDhan Dashboard Application is a platform created by the National Informatics Centre,
Ministry of Electronics & Information Technology, Govt. of India to track and monitor the
usage of digital payments in the country. The dashboard provides real-time data on the number
and value of digital transactions, as well as information on the types of transactions and the
platforms being used. Some of its features include:
 Real-time data on digital transactions: The dashboard shows the number and value of digital
transactions taking place in the country, broken down by different types of transactions (such
as UPI, debit card, credit card, etc.).
 Information on the platforms being used: The dashboard provides data on the various platforms
being used for digital transactions, such as BHIM, UPI, and various e-wallets.
 State-wise data: The dashboard shows the number and value of digital transactions taking place
in different states of India, allowing users to see the level of digital penetration in different
regions.
 Transaction History: The dashboard also provides transaction history of individual users,
allowing them to view their past transactions.
 Reports: The Dashboard also provides different types of reports such as transaction, merchants,
and user reports.
In conclusion, the digital payments ecosystem in India has grown significantly in recent years,
driven by government initiatives, an increase in internet and Smartphone penetration, and the
rise of e-commerce. The digital payment ecosystem is supported by private players who offer a
range of digital payment services. The future of digital payments in India looks bright with the
expected growth in the number of internet users and e-commerce market size.
Year on Year growth for Digital Payments in India has been significant and can be referred
below:

Digital Payment Dashboard has been integrated with Integrated with 118 public sector,
private sector, payments, regional rural and foreign banks. In FY 2021-22, 8,840 Crores
Digital Payment Transactions were achieved with 87.20% Current & Savings Accounts
seeded with Aadhaar Number, 81.05% Current & Savings Accounts seeded with Mobile
Number[7].

References
 https://timesofindia.indiatimes.com/business/india-business/cash-still-king-as-digital-
payments-inch-up-slowly/articleshow/61554102.cms
 https://www.bbc.com/news/world-asia-india-37974423
 https://www.livemint.com/news/india-to-have-around-900-million-internet-users-by-2025-
report-11659063114684.html
 https://www.npci.org.in/what-we-do/upi/product-statistics
 https://www.npci.org.in/what-we-do/upi/product-statistics,https://m.rbi.org.in/scripts/
AnnualReportPublications.aspx?Id=1351
 https://m.economictimes.com/tech/technology/indias-e-commerce-market-size-to-reach-120-
billion-by-
2026-report/articleshow/92740817.cms#:~:text=Indian%20e%2Dcommerce%20market
%20is,according%20to%20a%20new%20report
 https://digipay.gov.in/
 https://inc42.com/features/record-breaking-numbers-upi-2022-hint-india-maturing-digital-
payments-ecosystem/#:~:text=their%20total%20value.-,At%20the%20end%20of%20the
%20calendar%20year%202022%2C%20UPI’s%20total,of%20India’s%20GDP%20in
%20FY22.
Page Last Updated Date :October 6th, 2023

Digital cashless transactions refer to financial transactions that are conducted electronically
without the use of physical cash. These transactions leverage various electronic platforms,
digital wallets, mobile apps, online banking, and payment systems to transfer funds, make
payments, and conduct financial activities.

Benefits of cashless payment systems for customers

As a business owner, customer satisfaction is your main goal. This is because you want your
customers to have a great experience and keep coming back to do business with you. But
processing the customer payments can become an arduous and time consuming process. In
most cases, this is because the payment options you’ve offered are more convenient for you
than your customers.

Offering a variety of payment options will allow customers to choose their preferred method of
payment, which will get you paid faster. Adding online payments to your options gives your
customers the flexibility to pay through the option that is most convenient for them. Business
owners and consumers can both benefit from digital payment modes in various ways.

Advantages of cashless transactions for your business

Convenience

The feasibility of making and receiving payments is the key factor for prioritizing digital
payments. Online payments rule out the necessity to carry cash, and they also save time, as
business owners and customers no longer have to queue up for ATM services. Payment apps
also help you keep track of your incoming and outgoing funds, which comes in handy while
filing returns.

Security

Digital payment modes are made secure with varying levels of encryption and data
authentication. Most payment modes have enabled two-factor authentication (TFA) to add an
extra layer of security. Also, it’s always easier and safer to carry a smartphone rather
than carrying wads of cash.

Discounts

To boost the move towards a cashless economy, the government has decided to offer
incentives and discounts for making online payments. The government is now providing waivers
on cashless transactions utilised for service tax payments, purchase of fuel, train tickets,
highway toll tickets, and insurance schemes.

Types of cashless payment methods

Credit and debit cards are a popular way to make online payments, but they aren’t the only
cashless payment options. Here are a few other kinds of cashless transactions that are widely
utilised in India:

E-wallets

E-wallets are a popular mode of online payment, with PayTM and MobiKwik being the most
widely used providers. The user should register their mobile number with the app and link their
credit or debit card(s) to make payments. Users should also provide their KYC details to make
payments through the digital wallets. KYC is a verification process set up by the Reserve Bank of
India, which requires firms to collect information from their customers including their
identification details and biometrics. E-wallets can be used in places that debit/credit cards
can’t, as not a lot of small businesses invest in card machines.

Mobile banking applications

Most of the larger banks offer banking apps, with which business owners can transfer funds
between bank accounts instantly. They can also view their account balance and transaction
history at any time.

UPI (Unified Payments Interface) system

This system enables instant transfers of funds between bank accounts. Users can send and
receive funds once they provide bank details like their account number, IFSC code, and mobile
number.

BHIM app

This newly launched app is used to transfer funds between bank accounts. It’s reliable and it’s
secured with three-factor authentication. The user’s mobile number or Aadhar card number is
used to make payments. Though this app works on the UPI platform, customers need not
download mobile applications of multiple banks. All they have to do is install the BHIM app.

Aadhar payment app

This app was launched in 2016 with the primary aim of boosting online payments in the
country. It allows users to make offline payments and fund transfers between banks, using their
biometrics and Aadhar card details for authentication.

With the increase in online payments, we’ve seen a decrease in the long queues to make utility
bill payments and the need to be physically present at showrooms and service centers to pay or
recharge DTH and mobile services. Business owners and customers have taken to digital
payment methods for all sorts of transactions.

Since a major part of the Indian population is not yet well-versed in digital payment modes,
there’s a certain amount of reluctance in utilizing them. However, despite the limited
availability of internet and knowledge of such payment modes, the move towards online
payment is inevitable.

Demonetization gave a much-required push to cashless transactions. Though digital payments

have reduced a tad bit after demonetization, they’re still up by 50% compared to their levels
during the pre-demonetization days. At this point, both customers and business owners
are seriously considering digital payment modes. Some business owners have already adopted
digital payment modes, and others are coming forward to show their interest in moving
towards a cashless economy. Though the growth is gradual, digital modes of payment are here
to stay in the Indian economy.

Here are some common forms of digital cashless transactions:

1. Mobile Payments:

 Transactions using mobile apps that link to your bank account or mobile wallet.

 Examples: Google Pay, Apple Pay, Samsung Pay, and other mobile wallet apps.
2. Internet Banking:

 Online transactions conducted through a bank's website or dedicated online

banking app.

 Allows fund transfers, bill payments, and other financial transactions.

3. Debit and Credit Cards:

 Transactions made using debit or credit cards at point-of-sale (POS) terminals,

online shopping, or ATM withdrawals.

 Chip and PIN, contactless, or magnetic stripe technology is used for transactions.

4. Digital Wallets (e-Wallets):

 Prepaid digital accounts that hold money for online and offline transactions.

 Can be used to make payments, recharge mobile, pay bills, and more.

 Examples: PayPal, Paytm, PhonePe, Venmo.

5. UPI (Unified Payments Interface):

 A real-time payment system in India that allows instant money transfer between
bank accounts through a mobile platform.

 Users can link multiple bank accounts and make transactions using a single UPI
ID.

6. NEFT (National Electronic Funds Transfer) and RTGS (Real Time Gross Settlement):

 Electronic funds transfer systems used for transferring large sums of money
between bank accounts within India. NEFT or National Electronic Funds Transfer
allows users to transfer funds electronically from one account to another across pan
India. NEFT transfer is available round the clock. The centralized payment system is
operated by the Reserve Bank of India (RBI). You can do NEFT using ICICI Bank Internet
Banking and iMobile Pay Mobile Banking app.

 Benefits of NEFT:

 You can perform NEFT through online or offline modes

 The transfer can be completed faster, with convenience.

 It is economical to use NEFT for money transfers.

  NEFT does not require you to submit any cheque or demand draft (DD) for
money transfer.

7. IMPS (Immediate Payment Service):

 Real-time interbank electronic funds transfer service in India available 24x7,

including weekends and holidays. The IMPS or Immediate Mobile Payment
Services allows users to perform instant inter-bank money transfers on a real-time basis.
Unlike NEFT and RTGS, which is at times not available on holidays, IMPS is accessible
24*7 throughout the year, even on bank holidays.

Benefits of IMPS:

 IMPS fund transfer is a quick and secure money transfer method

 It is not compulsory for you to know the beneficiary’s IFSC code and account
number.

 You can perform IMPS using the iMobile Pay app and Internet Banking.

 It is accessible even on bank holidays.

 Money gets credited within a few seconds.

 Customers can perform intrabank as well as interbank payments.

 IMPS money transfer is available for NRI customers to transfer funds from an NRI
account to the account of a resident of Indian.

RTGS:

RTGS or Real-Time Gross Settlement indicates that the process of payment

happens in real-time rather than receiving the money sometime later. Users can
opt for this money transfer method if the transaction amount is large and needs
immediate clearing.

 It allows you to transfer a huge sum of money, especially companies that transfer funds
in one go without causing any further delay.

There is less possibility of counter-party default.

Benefits of RTGS:
  With the online transfer of funds through RTGS, there is no threat of a cheque being
stolen or instances of forgery.

 RTGS fund transfer helps organizations manage business capital efficiently

 Customers can perform intrabank as well as interbank payments.

 IMPS money transfer is available for NRI customers to transfer funds from an NRI account to the
account of a resident of Indian.
Difference between NEFT, RTGS & IMPS:

IMPS
iMobile Pay Internet
Categories NEFT RTGS Account Mobile Account Mobile
Number + Number + Number + Number
IFSC MMID IFSC +MMID
Minimum Transferrable Rs. 2
Rs. 1 Rs. 1 Rs. 1 Rs. 1 Rs. 1
Amount lakh

Maximum Transferrable Rs. 10 lakh Rs. 10

Amount (RIB & to Rs. 25 Rs. 2 Lakh Rs.10,000 Rs.2 Lakh Rs.10,000
lakh
immobile) lakh
Online & Online &
Payment mode Online Online Online Online
Offline Offline

All the three money transfer methods have their own advantages, you need to find the best match to
suit your requirements.

8. QR Code Payments:

 Scanning QR codes to make payments using a mobile wallet or banking app.

 Commonly used for merchant payments.

9. Internet Payment Gateways:

 Secure platforms that facilitate online payments for goods and services through
credit/debit cards, net banking, and more.

A payment gateway is a technology used by merchants to accept debit or credit card purchases
from customers. The term includes not only the physical card-reading devices found in brick-
and-mortar retail stores but also the payment processing portals found in online stores.
  Brick-and-mortar payment gateways also have begun accepting phone-based
payments using QR codes or Near Field Communication (NFC) technology.1

KEY TAKEAWAYS

 Payment gateways are interfaces used to collect consumer payment

information.

 In physical stores, payment gateways consist of the point-of-sale (POS) terminals

used to accept credit card information by card or by smartphone.

 In online stores, payment gateways are the “checkout” portals used to enter
credit card information or credentials for services.

 Payment gateways are distinct from payment processors, which use customer
information to collect payments on behalf of the merchant.

 There are also payment gateways to facilitate payment in cryptocurrencies like

Bitcoin.

How Payment Gateways Work

The payment gateway is a key component of the electronic payment processing system, as it is
the front-end technology responsible for sending customer information to the merchant
acquiring bank, where the transaction is then processed.

Payment gateway technologies are always evolving to reflect new consumer tastes and
technical capacities.

In the past, terminals would accept credit cards using magnetic strips and required paper
signatures from the customer.

With the development of chip technologies, the signature phase could be removed in favor of
a personal identification number (PIN) entered directly into the payment gateway hardware.
Today, contactless purchases are also available, with many customers now using their phones
as a payment device instead of plastic credit cards.

Aadhaar Enabled Payment System (AEPS):Allows customers to use their Aadhaar number and
fingerprint for transactions.

These digital payment methods offer convenience, speed, and security, promoting a cashless
economy and reducing the reliance on physical currency. It's essential to choose secure and
trusted platforms while conducting digital cashless transactions.

AEPS, constituted by the National Payments Corporation of India, is a payment system that uses
Aadhaar Cards to conduct banking transactions. Cardholders can complete transactions by
providing their biometric information at a Point of Sale (POS) or Micro ATM (Automated Teller
Machine) terminal. The transaction takes place via their Aadhaar-enabled bank account. The
specifics of AEPS are as follows:

 AEPS transactions go through the Aadhaar-linked bank account in a manner similar to

debit/credit card transactions.

 Cardholders must provide their Aadhaar number and biometric details (iris or fingerprint
scans) at POS and Micro ATMs to complete the transactions.

 Users do not need to provide bank details to complete an AEPS transaction.

 With AEPS, users can initiate fund transfers from one bank to another.

 Biometric authentication to complete financial transactions makes AEPS transactions

incredibly secure.

The banking services offered via AEPS include:Cash withdrawal,Cash deposit,Payment

transactions (C2B, C2G Transactions), Mini statements, Balance enquiry, Authentication

Aadhaar to Aadhaar fund transfers, BHIM Aadhaar Pay

The additional services offered under AEPS are:

 Demo authorization

 Best finger detection

 Tokenisation

 Aadhaar seeding status

How the Aadhaar Enabled Payment System works?

The AEPS machine functions like a POS machine. However, instead of a credit or debit card,
sellers must plug in the customer’s Aadhaar details and use their biometrics to authenticate the
transaction. Buyers also need to provide their bank’s Issuer Identification Number or name.

Cardholders must have a bank account linked to the Unique Identification number (Aadhaar). If
multiple accounts are linked to an Aadhaar Card, the primary account will be used to conduct
transactions. Plus, a Personal Identification Number (PIN) or One Time Password (OTP) will be
required to complete the transaction.

Benefits of using the Aadhaar Enabled Payment System

AEPS is designed to promote financial inclusivity and offers the following benefits:

 The payment system is accessible and easy to use.

 It is secure because it calls for a unique identification number and biometric data.

 It allows underprivileged sections of society to avail of modern banking services.

 Users need not provide bank details to complete transactions.

 Users can easily access their bank accounts and complete transactions quickly.

 Since Micro ATMs and POS machines are mobile and can be used in remote areas, AEPS
brings more users into the fold.

As a business owner, AEPS can be a significant plus for your enterprise. Since it allows more
sections of society to use modern banking, it can help your business attract new customers.
Plus, paying via AEPS is easy, efficient, and quick, making the checkout process hassle-free while
converting random browsers into purchasing customers. You can use the AEPS machines in
your store, regardless of the size or scale of your operations, and allow your customers to
purchase your goods and services securely.