Sixty percent of Indians still stay in Rural India, and this has a significant impact on the economic progress of the country. What has changed especially in Rural India is the Jan Dhan Account (JAM):
· Jhan Dhan Account: 90 percent of eligible Indians now have a bank account
· Aadhar number: More than a billion Indians have Aadhar
· Mobile/ smart phone penetration: Around 600 million smart phones with high data speeds at affordable rates
Indian economy is one of the fast-growing economies of the world, despite COVID and there has been significant developments, especially on the digital transactions space.
a) Post-COVID UPI transactions has grown to 2,800 million transactions per month from 1300 million transactions earlier,
b) Post-COVID, Ape’s transactions has grown to 400 million transactions per month from 200 million transactions earlier,
In both the above growth drivers in digital transaction, a large chunk has been from rural India.
Digital payments in rural sector
In the pre-COVID period, very few merchants and consumers from rural segments were using digital payment solutions, but post-COVID there has been a exponential growth in the number of users using PoS, Biometric devices for AePS withdrawal, QR code for UPI payment acceptance.
The government encouraging the public with incentives for using the UPI (United Payment Interface), reducing the service tax for digital transactions for government e-services signifies that there is a huge transformation towards digital payments.
Opportunities for digital payments
Digital payments in India is at nascent stage, and there is a push from varied quarters towards adapting the platform of digital payment solutions
Limiting scope for cash payments
RBI has regulated cash payments in a phased manner, e.g. Imposing restrictions and tax on cash purchase of jewellery beyond a prescribed value.
Imposing transaction charges for cash payments for payment to vendors, suppliers and services etc. and higher transaction charges for banking transactions like cash with drawal deposits etc.
More scrutiny over cash transactions
Launch of more digital payment solutions
Though India is cash-based economy, slowly the transition has started towards digital economy.
The RBI issuing payment bank licenses to many fintech companies
Strategic launch of UPI solutions like BHIM by GOI, and also enabling large private players like Google Pay, Amazon Pay, PhonePe, etc to enable hassle-free digital transactions
Aadhar-based payment solutions are strongly emerging strongly in the Indian market like AePS, Aadhar Pay, signifies the potential scope of carrying out digital payments even with feature phones.
The RBI reducing or terminating the cross transaction cost for bankers and UPI solutions to encourage them to reduce the cost of transaction to the end-users.
In the current scenario,
a) The process of mobile banking, IMPS solutions has got simplified
b) Increasing number of ecommerce companies offering their services in the rural segments
c) Direct and indirect initiatives from government towards improving banking services, compliance standards
d) Issuance of 'RuPay cards' linked with Jan Dhan accounts (Zero balance accounts)
e) Kisan Credit cards issued to farmers, drive in terms of enabling Post zand Biometric solutions to rural merchants.
To sum up, COVID has been a blessing for the spread and usage of various digital payments right from cards to UPI to AePS which has opened up opportunities that are unfolding the market dynamics of digital payments in Rural India.
(S Anand is the Chief Executive Officer and Co-Founder of PaySprint, a fintech venture focussed on Next Gen Neo Banking Solutions, offering a Unified Open API Platform.)
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