Until a decade ago it was impossible to anticipate that purchasing almost anything without the use of cash would become a common practice in India. The country has traditionally been a cash-dependent economy and it still remains an established mode of payment.
However, electronic payments are slowly and steadily taking over to become the main source of financial transactions across the country.
Digital payments will grow at a rapid pace over the next few years and account for a 71.7 percent share of all the payments by 2025.
Why are businesses and consumers increasingly preferring them? This article highlights the key reasons for the growth of digital payments in India.
Reasons for growth of digital payments in India
1. Easy onboarding and ease of use
Digital payments are essentially enabled for a business on its website/app by a payment gateway. Once you have chosen the right payment gateway, all the transaction-related processes are taken care of by the service provider.
Partnering with a payment gateway is a fairly simple process and is almost paperless.
Paytm Payment Gateway, for instance, offers 100% online onboarding, instant activation and with minimum documentation to help you start accepting payments within 24 hours.
Consumers get to choose from more than 100+ payment sources while transacting on the website. Additionally, with 250mn+ saved cards, 100mn+ saved bank accounts and 15mn UPI IDs users can easily and instantly transact without having to repeatedly add the payment details.
2. Increased awareness
Users have increasingly started to understand the modalities of digital payments and online businesses have played an important role in enabling the process.
Demonetisation and the pandemic further fuelled the proliferation of electronic payments including a larger chunk of the population on the journey towards digital transformation.
In India, more than 80 million adults made their first digital merchant payment after the start of the pandemic.
Thereafter, several businesses, fintech firms, government authorities and other institutions have consistently promoted the use of digital payment leading to a boost in awareness.
3. Smartphone penetration and internet expansion
Internet connectivity has starkly improved in India over the years with 5G telecom services likely to be rolled out soon. This increased capacity assures faster and easier interaction on the online world.
Parallely smartphone usage has seen an unprecedented rise as well, making India the second largest digital population in the world after China.
India will have 1 billion smartphone users by 2026 with rural areas driving the sale of internet-enabled phones.
Smartphones have become essential for a lot of everyday functions apart from enabling transactions which makes them an important personal belonging for people across all ages, geographies and socioeconomic classes.
4. Government policies
Cashless India has been one of the Government’s flagship programmes with an ambition to digitally empower the country and move towards a cashless economy. Multiple policies in the areas of tech and payment infrastructure have been introduced to support this pioneering initiative.
The Reserve Bank of India (RBI) has consistently released new guidelines and regulations to strengthen the digital payment ecosystem.
For example, in a recently released report by RBI titled Payments Vision 2025, the apex bank talks about its plan to triple the total digital payment transactions. Read about the key initiates in the report here.
Apart from facilitating multiple digital payment methods, the government is also making them accessible to more and more people by offering educational and reference material to actively pursue greater financial inclusion.
5. Speedy and transparent transactions
When compared to traditional methods of payments, digital payments are instant and can be carried out from any location at any time. This is a huge gain for e-commerce businesses considering transactions can happen 24/7 on their website/app.
Paytm Payment Gateway can process up to 3000 transactions per second with 99.99% uptime, maintaining a negligible possibility of delay or failure in payments.
Moreover, neither the customer nor the business has to track and follow up on the receipts. Messages, notifications and confirmation emails make the process simpler and transparent.
Additionally, for merchants, the dashboards offer a detailed summary of amounts credited as well as debited through the various payment sources.
How are digital payments beneficial for online businesses?
An impressive customer experience lies at the core of a successful e-commerce business. The seamlessness of digital payments greatly contributes to it and elevates the overall shopping experience for buyers.
Today, businesses should continuously keep up with the evolving nature of digital payments to achieve a competitive edge.
Data shows an increase of more than 500% in merchants accepting digital modes of payments during the half-year ended September 2021 as compared to half-year ended March 2019; in the case of UPI alone, there is an increase of more than 1200% over the same period.
Here’s how digital payments are advantageous for businesses:
- Reduce operational costs
- Optimize cash-flow
- Help drive data-backed decisions
- Boost sales
- Ensure secure transactions
- Offer a seamless checkout experience
- Extend customer base and business reach
- Automate related functions
The growth of digital payments in India is going to be a persistent process bringing with it new possibilities and opportunities. Right from government institutions to private entities and most importantly the consumer – everyone is actively contributing to its advancement.
The time ahead certainly holds exciting developments for digital payments and as businesses get ready to embrace them, choosing a robust and reliable payment gateway will be equally necessary.
Paytm Payment Gateway offers all the essential features necessary for a business to ensure hassle-free transactions, making it the most preferred solution among leading startups and enterprises in India.