Evolution of Contactless Digital Payments in India
- Published | 17 June 2024
The evolution of contactless digital payments in India has been marked by significant technological advancements and increasing adoption rates. Wireless technologies have played a crucial role in making this ambition a reality by providing transaction speed and convenience. Contactless payments have emerged as a quick, secure, and convenient option for everyday transactions, leveraging various devices such as credit cards, smartphones, and smartwatches. This contactless payment system allows customers to complete transactions by simply tapping or waving their selected device, eliminating the need for cash or physically inputting their card. The growing popularity and continued innovation in contactless payments are poised to make it a more dominant force in the future.
Advancement of Digital Payments in India: from Barter to Contactless Digital Payments
The evolution of contactless digital payments in India has been a transformative journey. From the early days of bartering to the current era of seamless digital transactions, India has witnessed a remarkable shift towards cashless payments. The COVID-19 pandemic accelerated this trend, as people turned to digital payment methods to minimize physical contact and ensure safety. Today, Indian consumers can easily swipe and touch their cards, or enter payment information into their smartphones and tablets, making transactions faster and more secure.
Furthermore, recent developments in the digital payments landscape have accelerated this growth. For instance, IndusInd Bank launched India's first contactless payment wearable, 'Indus PayWear', in March 2024. Initially available for Mastercard holders, the service will soon be extended to other card networks as well. This innovation highlights the ongoing efforts to enhance the contactless payment experience, making it more convenient and accessible to a broader audience. As technology continues to evolve, India is poised to remain at the forefront of digital payments, with its Unified Payments Interface (UPI) and other digital payment products driving the growth of the industry.
Government Initiatives and Regulatory Support to Promote Digital Payment Adoption
The Government of India has launched several initiatives to promote digital payment adoption and drive the growth of the digital economy. The Digital India program, launched in 2015, aimed to transform India into a digitally empowered society and a knowledge-based economy by ensuring digital access, digital inclusion, and digital empowerment while bridging the digital divide. Under the DigiDhan Mission, set up in June 2017, the government has taken several measures to promote a less cash economy and facilitate seamless digital payment experiences for all citizens. These initiatives include setting digital payment transaction targets for banks, expanding the payment infrastructure, developing the Bharat Bill Payment System and National Electronic Toll Collection program, introducing new digital payment modes, conducting awareness campaigns, improving digital and computer literacy through PMGDisha, and implementing incentive schemes for banks and fintechs.
As a result of these measures, digital transaction volumes have increased exponentially from 2,071 crore in 2017-18 to 13,462 crore in 2022-23. For the current financial year till 31.1.2024, already 14,888 crore transactions were recorded. According to Ministry of Electronics & Information Technology 2024 data, regulatory changes have supported UPI's growth, promoting its adoption through newer use cases and products based on existing UPI architecture. Increased adoption has led to an increase in UPI use across various customer segments, driving day-to-day digital payments in India. AePS has enabled access to finance among segments that rely on assisted transactions, with rising AePS transactions indicating healthy digital payment penetration. These initiatives have been critical in promoting contactless digital payment adoption and driving the growth of the digital economy in India.
Recent Trends in Contactless Digital Payments in India
-
In May 2024: RuPay, a product of the National Payments Corporation of India (NPCI), is thrilled to announce a special relationship with TATA IPL, revealing an exclusive wristband created for a select few playoff and finals attendance in 2024. This clever collectible wristband, part of the "RuPay On-The-Go" series, not only allows for seamless access management during events but also serves as a versatile contactless payment device thereafter. RuPay On-The-Go pioneered contactless payments, answering the needs of today's tech-savvy consumers. This cutting-edge technology simplifies transactions using fashionable accessories and wearables such as keychains, rings, watches, and wristbands.
-
In December 2023: ToneTag, a supplier of voice-based commerce and payments solutions, announced the launch of the Contextual Unified Secure Payment (CUSP) network. CUSP is a contextual, conversational, and edge-based proximity payment infrastructure for digital payments such as central bank digital currency (CBDC), Unified Payments Interface (UPI), and contactless tokenized debit or credit cards, according to the business. It includes safe offline data transmission to enable contactless payments and voice computing for a voice payment experience, among other features.
Future Prospects
The potential for contactless digital payments in India is very promising. Over the past six to eight years, digital payments in India have shown remarkable growth, transforming the country from being heavily reliant on cash to having a less cash-dependent economy. Digital-first transactions are now common in major cities, as well as in smaller urban and rural areas, and this trend is expected to continue. It is projected that retail digital payment transaction volumes will double by FY 2026-27, largely due to the sustained growth of UPI as a national payment channel. The recent announcement by the RBI regarding the use of conversational AI and offline payments will further emphasize the importance of UPI. Moreover, the integration of UPI with credit cards is expected to increase its usage in retail payments, particularly for small-value transactions. The combined effect of innovative technology, government policies, and changing consumer behaviour is anticipated to drive the continued expansion of contactless digital payments in India, establishing the country as a global example in the digital payments revolution.
Conclusion
In conclusion, the advancement of contactless digital payments in India has been driven by rapid technological progress and increasing consumer acceptance, shifting the country from a reliance on cash to a less cash-dependent economy. The COVID-19 pandemic has significantly hastened this transition, encouraging the use of secure and convenient digital transactions. Government initiatives and regulatory support have been involved in fostering this growth, leading to a substantial increase in digital transaction volumes. With ongoing technological advancements and changing consumer behaviours, India is well-positioned to lead the digital payments revolution, offering promising opportunities for further expansions and innovation.
Contact Us:
BlueWeave Consulting & Research Pvt. Ltd.
+1 866 658 6826 | +1 425 320 4776 | +44 1865 60 0662