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The evolution of India’s payment landscape and road ahead


When credit and debit cards came into existence, they remained a majorly cash-driven economy, where people preferred to keep, carry and exchange notes and coins until recently.

The evolution of India’s payment landscape and road ahead
India’s payment system has evolved by leaps and bounds over the years. We have indeed come a long way, from exchanging goods for goods to cashless, one-click transactions. However, India’s movement toward a faster, smoother, and safer payment system wasn’t spontaneous. When credit and debit cards came into existence, they remained a majorly cash-driven economy, where people preferred to keep, carry and exchange notes and coins until recently.
In India, demonetization was one of the key events that marked the beginning of a cashless economy. And now, as we enter the third decade of the 21st century, cutting-edge technologies are helping us embrace digital payments, making this cultural-economic transition possible.
So, let’s take a quick look at the – the good, the better, and the best of our ever-evolving payments landscape.
A Look into the Past: From First Documented Coinage to Electronic Payments
According to Archaeologists, around the 7th-6th century BC and 1stcentury AD, 'Punch Marked' coins, made in silver and bronze, were issued in India, making us one of the earliest adopters of the currency system. Sher Shah Suri, who took control of the Mughal Empire in 1540, introduced Rupiyaa, the predecessor of today’s rupee, which later became the official currency of India, and later during the first world war, paper notes become popular due to an acute shortage of silver.
Then in 1980, the Central Bank of India introduced the first credit card while HSBC opened the first ATM in Bombay. In 2005, NEFT was introduced, and then, the country’s first e-wallet, Oxigen Wallet, was launched in July 2004. Around the mid to late 2000s, debit cards became increasingly popular among Indians with more than 150 million people having one or more cards at their disposal.
Payments through the decade
In the last decade, India witnessed a burgeoning growth in digital payments, including the introduction of innovative payment systems, the entry of non-bank players, and a gradual shift in customer behavior from cash to digital payments. The decade of 2010-20 can be termed as the decade of payments in India as quoted by RBI in their booklet – payments systems in India.
In 2016, RBI and the government jointly rolled out the Unified Payments Interface (UPI), a uniquely secure and interoperable interface for retail payments, biometric-based as well as QR code-based payments. By 2018, total UPI transactions hit the $7 billion mark and by 2019, it surpassed wallet and card-based and transactions, becoming India’s most preferred payment method.
Digital Payments Gets a Boost
In 2016, demonetization paved the way towards a cashless economy. Four years later, the COVID-19 pandemic further pushed the adoption of digital payment methods. People, wary of coming in contact with others, refrained from using cash. The ATMs started to look deserted and the use of cards, UPI, wallets, and e-banking soared. In November, UPI transactions hit an all-time high at 221 crore transactions worth Rs 3.9-lakh crore. The preference shifted from cash to contactless transactions. The big question is, will this shift outlast the pandemic?
Charting the next phase of growth in payments
As we enter 2021, it seems people have grown more comfortable with using digital payment methods. While COVID-19 has indeed accelerated the adoption of digital solutions in every aspect of our lives, including how we shop and pay for things, the shift didn’t happen solely because of the pandemic. New technologies have made digital payments clean, easy to use, and much more convenient to users.
On top of that, attractive offers, including cashback and coupons are providing an added incentive to use alternative payment methods. People have come to trust and use non-bank financial services, creating a level playing field in the financial sector.
With personalization, customer convenience, and security becoming prime drivers of success in the digital era, both banks, and non-banking financial services institutions are rapidly adopting fintech offerings. New trends in the payments sector include voice-based payments, wearables payments, which allow the user to check balance, transfer money while they’re engaged in other activities. There is also a new range of services such as Request to Pay and Pay Later, which are offering ease, control, and flexibility in making purchases or paying bills. With people showing a growing appetite for digital payment solutions, even newer technologies such as Blockchain, DLT, and NUE are becoming mainstream in India.
As coronavirus continues to spread, cash usage has been declining sharply. With both the public and private sectors pushing digital payments, it is becoming mandatory in the post-COVID world. The future is digital and with payment solutions becoming faster, smoother, and more secure, India’s payment system won’t be an exception.
The author, Suresh Rajagopalan, is CEO at Wibmo. The views expressed are personal

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