Mrs. Glanciya Fernandes
Lecturer, Department of Business Management
Milagres College, Mangaluru  

ABSTRACT: 

Indian economy is one of the fast growing economies of the world. Despite of global turbulence's of economic conditions, Indian economy has been focusing on development. The wind of change in payment system in India is gaining strength by government accelerating financial inclusion, opening new business models and providing impetus to digital payments system. The system offers an unprecedented opportunity to people, most of who lives in rural India or are migrants in big cities. Rural India has significant impact on the economic progress of the country, and with the emerging changes of ICT penetration, and the impact of demonetization, alongside the digital initiatives carried out for rural segments, the need for improving the trends of digital payments model in rural India is very important. Considering the benefits like transparency in transactions, scope for curtailing parallel economy and improving the ease of business, it is very essential that the transformation towards digital payments, even in the rural economy is empowered. Some of the revolutionary developments in the recent past like launch of many digital wallets like – Paytm, Mobiwik, Free Charge etc. and government launching many UPI (united payment interface) solutions and BHIM app for smooth transition to digital payments, there are significant developments taking place. Stats from the market research also depict considerable rise in digital transactions post de-monetization period.

KEYWORDS: Digital Payment, Cashless, Digitalization, Electronic payment


INTRODUCTION

Indian economy is one of the fast growing economies of the world. Despite of global turbulences of economic conditions, Indian economy has been focusing on development. In the recent past, there are significant developments that has taken place in the Indian financial system, which has led to huge transformations, trends and changes in the business dynamics.Though the government of India has been focusing on the digital transactions initiatives since last few years, the actual impact of digital payments has taken place in India in significant manner post the demonetization period. India economy has the intrinsic structure of rural and urban economic developments. Majority of the Indian economy depends on rural economy, and only when the digital payment methods become an integral part of rural economic development, the digital initiatives could be considered as successful. In the recent past, digital payments have gained momentum in the country, both in the case of rural and also the urban segments. India has predominantly been a cash driven economy and the culturally the deep rooted trends of cash based purchases has widely been the economic culture. In wake of the government initiatives towards transformation towards digital economy, and many private companies emerging in the space of digital transaction solutions like the E-Wallets, Mobile app solutions (UPIs), payment bank licenses issued by RBI, it is imperative that the market is gearing up towards more transparent and compliance based system, and of digital trends. For successful implementation of digital transactions and digital banking system, certain key processes that are very essential are net/mobile banking, more of e-commerce presence in rural segments, digital transaction solutions like the PoS solutions usage in merchandise, usage of plastic currency etc. But the crux factor that has to be taken in to consideration is about how effectively the system is adaptable in the rural segments of the country, considering the opportunities and challenges according to the existing scenario. In this research paper, the emphasis is on gaining insights in to the opportunities and challenges that are envisaged in the digital payments system penetration in to rural segments.

 

CHALLENGES AND OPPORTUNITIES

1. Consumers are yet to get rid of the cash based transaction habits, as for decades India has been a cash based economy

2. Digital divide in terms of awareness about using the digital solutions like smartphone based transactions, feature phone based transactions, usage of credit/debit cards at PoS solutions etc are some of the key issues.

3. The other significant issue of digital divide is the lack of bandwidth and reach of technology to various locations. Though, it is being sounded that every corner of India shall have ICT services in place, still in many of the locations where the installations were complete, services are not available for the customers.

4. For instance, as a part of Govt. Initiative from Rajasthan towards streamlining the ration supplies, bio-metric verification of Aadhar details at the dealership has been made mandatory, however, the dealers could barely have connectivity to ensure timely verification and the public face challenges

5. Such instances signify that the digital payments modality can only be practical and true to nature, when the loop holes like connectivity, adequate PoS solutions and other such factors are addressed in quick turnaround time.

6. Slow Internet speeds: India is plagued with very low internet speeds, which continue to inch up but are lower than global benchmarks. As per the Akamai reports Q4 2016 the average internet speed in India is 5.6 Mbps which is still behind when compared to other countries in Asia Pacific region. India’s global rank is 97, a little behind China and Indonesia out of 149 qualifying countries.

7. Risk of Piracy: The digital media industry has not been able to fully monetize the content due to rampant piracy in India. Weak IP regulations and ineffective enforcement has discouraged players to produce original content and IP.

8. Online Payments: One of the primary forces impeding the growth of subscription and pay-per-view revenue models are the hassles that the co summer faces while making payments on digital platforms, even when they are willing to pay. This is on account of low-credit card penetration, fear of using net-banking and credit cards online due to security threats and the lack of experience of transacting online.

9. Risk of Cyber Fraud: As the digital channel in financial services continues to evolve, cyber security has become a business risk, rather than simply a technical risk. Security breaches can damage reputations and destroy trust, thereby jeopardizing the investments made in digital solutions. A single hack can ensure millions of accounts being compromised, as it happened in October when 3.2 million card details were stolen in a malware related security breach. These cards from customers of State Bank of India, HDFC Bank, ICICI Bank, Axis Bank and others, were used at ATMs. The stolen debit cards were used in China. The heist is still under investigation,but is almost forgotten in the scramble for a digital payments future.

10. Availability of PoS solutions has also became a challenging issue. As the demand for PoS solutions has raised in a compounding way, and the demand is not adhered too, fast track progress of digital payments is getting impacted.


LITERATURE REVIEW 

Indian payments industry is undergoing an ecosystem expansion and transformation and at the same time entry of new banks, acquiring and processing companies, is likely to bring unique business model nuance to the fore. With a large number of organizations conducting business this way, it has become evident that the field of e-commerce has a promising future ahead and businesses are going to obtain maximum benefit from it (Abrazhevich, 2004, p.1). Electronic Payments provides greater freedom to individuals in paying their taxes, licenses, fees, fines and pure chases at unconventional locations and at whichever time of the day, 365 days of the year [Kaur.k & Dr. Pathak. A, 2015].However, there are several barriers identified to the adoption of this payment method [Bezhovski. Z]; such as digital literacy, digital usage, fraud, consumers ‘privacy, application technology, and computer security.So certain measures should be taken to grant this industry a promising future ahead.

OBJECTIVES OF THE STUDY

1. To assess the infrastructure available in Rural Area to support the digital payment system

2. To analyze the different digital modes of payment system available in Rural Area

3. To investigate problems and prospects of cashless economy and the challenges in making India a cashless Economy

METHODOLOGY

The data is collected from the secondary sources. The study is designed by adopting the method of reviewing different research articles, research journals, and internet sources.

LIMITATIONS OF THE STUDY

The study has been collected only through secondary data.

DIGITAL PAYMENT: SURPRISING TRENDS EMERGE FROM RURAL INDIA

Digital payments in India have evolved into a multi-modal experience. In 2017, we had foreseen a shift of digital payments from physical cards and wallets to newer forms of payments such as Unified Payments Interface (UPI), Bharat QR, Aadhaar Enabled Payment System, among others. Of these, UPI has seen a dramatic rise as both new entrants (including technology giants) and incumbents alike have brought UPI offerings to the market. The Indian economy has been dominated by cash. But the increased smartphone adoption and favorable regulatory policies have created the baseline infrastructure required for a leapfrog growth in digital payments—these have grown at a CAGR of 53% over the last five years, and expected to reach $1 trillion in value by 2023. Further, relentless innovation, easy-to-use payment products, interoperable payment platforms and customer awareness are expected to continue to drive the shift to digital payments from cash.

While 44% of urban customers have taken up digital payment channels, rural customers are a distant second, at only 16%. While traditionally all initiatives undertaken by banks have followed the urban-first philosophy, there seems to be a potential for adoption of digital payments among rural customers, in parallel with urban.

THE GROWTH OF THE INDIA CASHLESS PAYMENT SPACE IS EXPECTED TO BEDRIVEN BY FOUR TRENDS:

Cash being expensive: Though there are several perceived benefits of transacting in cash (such as instantaneous settlement,relative anonymity, and the notion of security associated with holding physical value), there are several latent and implicit costs associated with cash.

Advancement in technology:Technology has been advancing at a rapid pace to deliver robust, secure and convenient payments solutions. This enables rapid delivery of payment services to large sections of the population.

Economical: Digital payments allow for services to be delivered at lower costs, afford greater scalability and greater ease of access.This in turn, helps in fostering economic growth and financial inclusion.

Government initiatives: Initiatives taken by the government have created a catalytic environment for the greater proliferation and growth of digital payments

CONCLUSION: 

For sustained development and growth with robust economic development, certain integral factors like improved transparency, corporate governance and restricting the parallel cash based economy. Such developments could be feasible only with rural India too embracing the digital payments and digital transactions. Considering the quantum of opportunities that are unfolding for market dynamics of digital payments, if the challenges that are discussed are addressed and improved solutions in terms of UPIs, mobile wallets, and digital transactions with more secured features, ease of transactions and reduced cost of managing the digital payments could lead to more potential developments and supporting in improved conditions of digital payments processing in rural sectors.

REFERENCE: 

Jain, M., 2016. Three charts show how mobile wallets are exploding in India. [Online]Available at: https://scroll.in/article/809228/three-charts-show-how-mobile-wallets-are-exploding-in-india-but-plastic-cards-are-still-ahead [Accessed 23 Feb 2017].

WEBSITES: 

http://www.iraj.in/journal/journal_file/journal_pdf/14-381-150400473635-40.pdf

https://www.financialexpress.com/opinion/digital-payment-surprising-trends-emerge-from-rural-india/1303964/

https://eprawisdom.com/jpanel/upload/articles/518pm31.Zahoor%20Ahmad%20Shah.pdf

http://www.visa.co.in/aboutvisa/research/include/Digital_Payments_India.pdf7.

https://www.pwc.in/assets/pdfs/publications/2017/securing-the-cashless-economy.pdf8.http://finmin.nic.in/reports/watal_report271216.pdf9.

https://www.bnymellon.com/_global-assets/pdf/our-thinking/innovation-in-payments-the-future-is-fintech