Digital payments grow at CAGR of 61% in 3 years

The Reserve Bank of India's mandate on data localisation barring foreign payment firms from storing data on servers outside India and mirroring payments data in the country has not been fully implemented.

Some payment firms, including Facebook-owned WhatsApp Pay looking to set up their operations in the country, are still struggling with the clampdown by India's banking regulator.

While the process may take some more time to complete, the digital payments ecosystem in India has witnessed significant growth in the past three years.

According to data revealed by the RBI, digital payments have grown at a compounded annual growth rate (CAGR) of 61% over the past three years in terms of volume. As far as value is concerned, the CAGR stands at 39% during the same period.

The volume of retail digital transactions has surged from around 680 crore between October 2015 and September 2016 to 2,846 crore between October 2018 and September 2019 amounting to transactions worth Rs 113 lakh crore and Rs 302 lakh crore respectively.

Digital payments constituted a massive 96% of total non-cash retail payments during the period of October 2018 to September 2019.

During the same period, the National Electronic Funds Transfer (NEFT) and Unified Payments Interface (UPI) systems handled Rs 252 crore (2.5 billion) and Rs 874 crore (8.7 billion) worth of transactions with year-on-year growth of 20% and 263%, respectively.

This is the testament to UPI's remarkable growth, which has been outpacing other modes of payments and clocked 1.15 billion transactions in the month of October.

To further augment the adoption of the two payments modes - NEFT and UPI - the RBI has introduced several mandates, including no transaction charge on NEFT and allowing electronic mandates (e-mandate) on UPI.

From January 2020, banks will not charge savings bank customers a fee for NEFT transactions. On the other hand, e-mandate will make secure all recurring payments like telephone bills, insurance premiums, utility bills, SIPs, school fees, among others.

The RBI has also taken two other important decisions: to constitute a committee to assess the need for multiple QR codes and to permit all authorised payment systems and instruments (non-bank PPIs, cards and UPI) to link with National Electronic Toll Collection's (NETC) FASTags.

This move will facilitate the use of FASTags for parking and fuel payments via the interoperable mode of payments.