essay on digital payments in india

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Digital Payment In India Essay – Know the types of digital payment platform & their benefits

The Indian Government initiated a flagship program named ‘Digital India’ with an objective to promote digital payments and it aspires to convert India into a digitally empowered society and knowledge economy. Recently, Ms. Nirmala Sitaraman made a statement in Budget 2022 to establish one digital payment system in 75 districts across the country. In this post we have talked about  digital payment in India essay  followed by the pros and cons of digital payments across the nation.

Table of Contents

Digital Payment In India Essay – Introduction

A digital payment, commonly known as an electronic payment, is an electronic transfer of funds from one account to another. As a result, no real money or instruments such as cash, cheques, or other similar things are exchanged. However, one should be aware that digital transaction does not only refer to online transactions; it also includes transactions processed in a physical location. This indicates that both the payer and the payee exchange currency via digital means. ATMs aren’t the only way to make digital payments, online banking and UPI are also options. RTGS, NEFT, and IMPS are examples of online banking. Nearly every single bank in India offers digital payment systems, allowing customers to pay and receive payments electronically in a timely manner.

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Essay On Digital Payment In India – Kinds of Digital Payments

Following the advent of Cashless India, India now has ten different digital payment options. Some approaches have been in use for over a decade, while others have only lately gained popularity. Let’s take a look at some of the most common digital payment platforms and see which one would be the best fit for you based on the features they provide.

Mobile Banking

Several banks offer mobile applications that can be downloaded from App stores. It allows customers to conduct various types of transactions using a smartphone from a distance. It enables customers to conduct various types of financial transactions using a smartphone or tablet from a distance. Mobile Banking is a terrific method to keep track of the bank accounts in today‘s world.

Micro ATM systems are used by thousands of Entrepreneurs to provide basic banking services. The said entrepreneurs utilizes a gadget that authenticates the fingerprint and allows the customer to transfer money from your Aadhar-linked bank account. Banks all around the country are linked to the Micro ATM devices. It allows a person to transfer or withdraw funds instantaneously to any bank.

Internet Banking

Customers can process transactions and other financial operations over a bank’s website using Internet Banking. It  enables customers to conduct all of their banking transactions online. Customers must first register for online banking with the bank where they have a Savings Account.

Mobile Wallet

A mobile wallet/digital wallet/ e-wallet is a sort of virtual wallet that allows a person to link the debit or credit card details to your mobile wallet software and transfer funds to the wallet online. Instead of physically utilizing cards, this app can be used to make transactions digitally. A customer must link their bank account to their mobile wallet in order to transfer money into it.

Bank Prepaid cards

These are plastic cards provided by banks that are pre-loaded with funds and can be used in the same way as a debit card. These are not linked to an account and must be charged with funds from your bank account, either online or in-person.

Unified Payment Interface (UPI)

It connects several bank accounts (from any partner bank) to a single mobile app, allowing for multiple banking functions, smooth fund routing, and merchant payments all under one roof. Transactions can be carried out 24*7*365 via UPIs.

AADHAAR Enabled Payment System (AePS)

The AePS was created to help accelerate financial inclusion in the country by leveraging the visibility and reputation of Aadhar. It allows banks to safely and securely route Aadhar-initiated interbank transfers via a central switching and clearance service.

Unstructured Supplementary Service Data (USSD)

The system is intended to promote financial inclusion and development in remote areas with limited internet access. The transfers are limited to Rs 5,000 for each transaction for security reasons.

Banking Cards

It encompasses all card kinds, including debit, credit, and prepaid cards. Visa, MasterCard, and RuPay are the most popular card payment methods in India. Banking cards have become one of the most popular payment methods due to the immense convenience, control, flexibility, and security they provide when compared to other options. 

Point of Sale (POS) Terminals

A POS is a location where sales are carried out. As a result, a POS can be anywhere. It’s readily available and has no transaction limits set by the RBI, making it a suitable and safe way to pay for things.

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 Importance Of Digital Payments In India 

• Digital payments are a speedy, friendly and safe mode of payments.
• Most of the digital payment wallets and other modes don’t charge anything as processing fee and thus it is economical for most of them.
• Users also get rewards and other benefits on certain digital transactions.
• Digital wallets help in maintaining the transaction records.
• With the help of digital payments, govt. can keep track of unappropriate transactions.

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Conclusion of Digital Payment In India Essay

Firstly due to demonetization and then because of COVID-19 and India’s push for cashless transactions, our reliance on cash has decreased significantly with the emergence of many digital payment options. These approaches are not only simple and friendly to use, but they also provide additional protection, cost savings, and adaptability.

Check the details about Digital Payment in India

Digital payment is an electronic transfer of funds from one account to another.

Read the above mentioned part in this post to read about the advantages of digital payment in india.

Currently, there are 10 kinds of digital payments in India. Please read above to know more about the types of digital payments.

Yes, digital payments are safe in India.

RBI governs all transactions related to digital payments.

By Skandh Gupta

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DIGITAL PAYMENTS AND THEIR IMPACT ON THE INDIAN ECONOMY

Recent case studies.

India has a huge potential for digital payments. As of October 2021, the country had around 1.18 billion mobile connections, 700 million Internet users, and about 600 million smartphones. These numbers are growing rapidly each quarter. With about 25.5 billion real-time payment transactions, India ranked first in the world in terms of the number of transactions in 2020.

In 1996, Industrial Credit and Investment Corporation of India (ICICI) introduced online banking services in India, by using electronic banking at its branches. Later in 1999, banks such as HDFC, IndusInd, and Citi launched online banking facilities. The trend continued to grow with increasingly more banks launching net banking services in India. This marked the beginning of the digital transactions era in India – several new banks started offering services to users.

In 2008, the National Payments Corporation of India (NPCI) started its journey. It was formed by the Reserve Bank of India (RBI) and Indian Banks’ Association (IBA) in order to create a robust payment and settlement infrastructure in India. Since then, it has launched several products such as Aadhaar Enabled Payments System, Bharat Bill Payments System (BBPS), BHIM, and Cheque Transaction System.

• Banking Card – This was launched by the Central Bank of India in India in 1980, in the form of the first credit card. MasterCard was introduced in 1988, and until 1993, several PSU banks started issuing credit cards.
• Unstructured Supplementary Service Data (USSD) – The USSD functionality was launched in 2016. This is a mobile banking facility enabling users to use mobile banking without smartphones or an Internet connection.
• Aadhaar Enabled Payment Systems (AEPS) – This is a bank-led model which allows online interoperable financial inclusion transactions at point-of-sale (PoS) through the business correspondent of any bank using the Aadhaar authentication.
• Unified Payments Interface (UPI) – UPI was developed by NPCI in 2016; it facilitates peer-to-peer, person-to-merchant transactions.
• Mobile Wallet – This is a virtual wallet that stores payment card information on a mobile device.
• Bank Pre-Paid Card – Under the motto “Pay Now, Use Later,” the pre-paid cards allow users to buy things with funds available in their cards.
• Point of Sale – Point of Sale (PoS) is a technological instrument provided by a Merchant Establishment (ME) to carry out the sale of goods or services to customers in a cashless environment.
• Internet Banking – This is an online banking method that enables customers of a bank or financial institution to carry out transactions through a portal.
• Mobile Banking – This is a service provided by banks and financial institutions to carry out financial transactions through a mobile device.
• Micro ATM – These are portable devices allowing banking transactions through card swipe machines.

In order to transform India into a digitally empowered society and knowledge economy, the Government of India launched Digital India programme in 2015. The programme focuses on three main vision areas: digital infrastructure as a core utility to every citizen, governance and services on demand, and digital empowerment of citizens. Through the programme, the government wants to ensure the availability of high-speed Internet, provide mobile phones and bank accounts to every citizen, ensure availability of services in real-time from online and mobile platforms, make financial transactions electronic and cashless, and ensure digital literacy and availability of digital resources across the country.

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Digital Payments In India: Meaning, Types, How Does It Work, and Benefits

Table of Contents

What is Digital Payment?

Digital payments are transactions that occur via digital or online modes. This means both the payer and the payee use electronic mediums to exchange money.

The Government of India has taken several measures to promote and encourage digital payments. As part of the ‘Digital India’ campaign, the government aims to create a ‘digitally empowered’ economy that is ‘faceless, paperless, and cashless’. There are various methods and types of digital payments.

You must note that digital payments can take place through the Internet as well as on physical premises. Here are some examples of digital payments, buying something from e-commerce platforms and paying for it via UPI (unified payments interface) qualifies as a digital payment. Similarly, if you purchase something from your local grocery store and choose to pay via UPI, that also is a digital payment. 

Now that you clearly understand what is digital payment, let us understand the process of payments.

How Does Digital Payment Work?

Have you ever wondered how digital payments really work? Let’s simplify it for you in this section.

1. The Parties Involved

In digital payments, simplicity on the surface masks a complex network of intermediaries, ensuring smooth and successful transactions. Key players in digital payment systems include the merchant (payee) and the consumer (payer), whose interactions initiate the digital payment process. Both parties require a bank account and online banking to engage in digital transactions.

Additionally, other key players include the bank and the payment network, which facilitate secure fund transfers.

2. Bank Accounts

For digital payments, merchants and consumers participate as customers, so they need to have bank accounts with online banking features. Bank accounts build up the foundation of conducting e-transactions by storing funds securely and endorsing transfers.

3. Step-by-step Transaction

• The consumer starts payment transactions using UPI, mobile wallets or a similar option of his choice.
• The payment details are transmitted securely into the payment network.
• The payment network checks for the balance, thereafter, funds are moved from the consumer’s bank account to the payee’s bank account.
• A confirmation is sent to both the buyer and seller to confirm that the transaction has been completed.

4. Payment Rail

Payment rails serve as the backbone infrastructure that enables the transfer of funds between banks. They function as the pathways through which transactions move, linking institutions and guaranteeing the smooth flow of funds. Payment rails exist in many formats, such as automated clearing house (ACH), card networks and real-time payment systems, each designed for transaction types and processing speeds.

Types of Digital Payments In India

There are several benefits of digital payments. After the launch of Cashless India,(which aims to promote a cashless economy), we currently have ten digital payment methods available in India. Some digital payment methods have been used for over a decade, some have recently gained popularity, while others are relatively new. 

Here are the types of digital payments that are following:

1. Banking Cards

Indians widely use banking cards, debit/credit cards, or prepaid cards as an alternative to cash payments . In 1981, the Andhra Bank launched the first credit card in India.

Cards are preferred because of multiple reasons, including, but not limited to, convenience, portability, safety, and security. This is the only mode of digital payment that is popular in online and physical transactions. Many apps are being launched to manage card transactions, like Cred, Square, etc.

2. Unstructured Supplementary Service Data(USSD)

The unstructured supplementary service data (USSD) was launched for those sections of India’s population which do not have access to proper banking and internet facilities. Under the USSD, mobile banking transactions are possible without an internet connection by dialling *99# on any essential feature phone.

This number is operational across all telecom service providers (TSPs) and allows customers to avail of services, including interbank account-to-account fund transfer, balance enquiry, and availing of mini statements. Around 51 leading banks in India offer USSD service in 12 languages, including Hindi and English.

3. Aadhaar Enabled Payment System (AEPS)

The Aadhaar Enabled Payment System (AEPS) is a bank-led model for digital payments initiated to leverage the presence and reach of Aadhar. Under this system, customers can use their Aadhaar-linked accounts to transfer money between two Aadhaar-linked bank accounts. According to data from the National Payments Corporation of India (NPCI), the AEPS had crossed transactions over 205 million till February 2020.

The AEPS does not require physical activity like visiting a branch, using debit or credit cards or signing a document. This bank-led model allows digital payments at PoS (point of sale / micro ATM) via a business correspondent, known as Bank Mitra, using Aadhaar authentication. The AePS fees for cash withdrawal at Business Correspondent poin ts are around ₹15.

4. Unified Payments Interface (UPI)

The UPI is a payment system that culminates numerous bank accounts into a single application, allowing money transfers between parties. Compared to NEFT(national electronic funds transfer), RTGS (real-time gross settlement), and IMPS (immediate payment service), the UPI is considered a well-defined and standardised process across banks. You can use UPI to initiate a bank transfer anywhere in just a few clicks.

The benefit of using UPI is that it allows you to pay directly from your bank account without the need to type in the card or bank details. This method has become one of the most popular digital payment modes in 2020, with October witnessing over 2 billion transactions. 

5. Mobile Wallets

As the name suggests, mobile wallets are a type of wallet where you can carry cash in a digital format. Often, customers link their bank accounts or banking cards to their wallets to facilitate secure digital transactions. Another way to use wallets is to add money to the mobile wallet and use the balance to transfer money. You can also check out the digital wallets guide , for necessary details and clarify confusions, if any.

Nowadays, many banks have launched their wallets. Additionally, notable private companies have established their presence in the mobile wallet space. Some popularly used ones include Paytm, Freecharge, Mobikwik, mRupee, Vodafone M-Pesa, Airtel Money, Jio Money, SBI Buddy, Vodafone M-Pesa, Axis Bank Lime, ICICI Pockets, etc.

6. Bank Prepaid Cards

A bank prepaid card is a pre-loaded debit card issued by a bank, usually meant for single use or can be reloaded for multiple uses. It is different from a standard debit card because the latter is always linked to your bank account and can be used numerous times. This may or may not apply to a prepaid bank card.

Customers can create a prepaid card with an account that complies with Know Your Customer (KYC) norms. Corporate gifts, reward cards, or single-use cards for gifting purposes are the most common examples of these cards.

7. PoS Terminals

The PoS is the location or segment of a sale. These terminals were considered checkout counters in malls and stores where payments were made for a long time. The most common type of PoS machine is for debit and credit cards, where customers can make payments by simply swiping the card and entering the PIN (personal identification number).

With digitisation and the increasing popularity of other online payment methods, new PoS methods have emerged. First is the contactless reader of a PoS machine, which can debit any amount up to ₹2000 by auto-authenticating it without needing a PIN.

8. Internet Banking

Internet Banking, also known as e-banking or online banking, allows the customers of a particular bank to make transactions and conduct other financial activities via the bank’s website. It requires a steady internet connection to make or receive payments and access a bank’s website called Internet banking.

Today, most Indian banks have launched their Internet banking services. It has become one of the most popular means of online transactions. Every payment gateway in India has a virtual banking option available. Some of the top ways to transact via Internet banking include NEFT, RTGS, and IMPS.

9. Mobile Banking

Mobile banking refers to conducting transactions and other activities via mobile devices, typically through the bank’s mobile application (app). Today, most banks have mobile banking apps that can be used on handheld devices like mobile phones and tablets and sometimes on computers.

Mobile banking is known as the future of banking, thanks to its ease, convenience, and speed. Digital payment methods, such as IMPS, NEFT, RTGS , and other services like investments, bank statements, bill payments, etc., are available on a single platform through mobile banking apps. Banks encourage you to operate digitally as it makes processes easier for them.

10. Micro ATMs

A micro ATM is a BC device to deliver essential banking services. These correspondents, who could be local store owners, will serve as a  ‘micro ATM’ to conduct instant transactions. They will use a device that will let you transfer money via your Aadhaar-linked bank account by merely authenticating your fingerprint.

Essentially, the BC will serve as a bank. You need to verify your authenticity using UID (Aadhaar). The essential services that micro ATMs will support are withdrawal, deposit, money transfer, and balance enquiry. The only requirement for Micro ATMs is to link your bank account to Aadhaar.

What Are the Benefits of Digital Payments?

Some of the key advantages of digital payment in India that have made them a preferred choice for transactions are:

1. Faster Payments

  Digital payments allow immediate transactions that can be processed immediately, reducing the waiting time that one has to go through with traditional payment methods. This makes transactions seem smooth and efficient.

2. Convenience in the Payment Procedure

Digital payments enable swift and hassle-free transactions from your devices, eliminating the need for physical presence or documents. Whether you’re paying bills, shopping online, or transferring funds, digital payment methods offer a user-friendly experience that saves both time and effort.

3. Better Payment Security

Digital payment systems use encryption and system authentication protocols, which minimise the risk of unauthorised access and effectively prevent fraud. Your financial information is protected, keeping you stress-free throughout the entire process of making digital payments.

4. Improved Efficiency

Automation and digitisation in payment processes have significantly enhanced operational efficiency. By minimising manual intervention, errors are reduced, and financial workflows are streamlined, resulting in a more efficient and error-free system.

Digital Record of Transactions: Digital payments provide a traceable account of transactions, thereby guaranteeing safety. Such efficiency and credibility allow individuals and businesses to maintain accurate financial records. It is easy to monitor the payment history and can be referred to when required.

5. Reduced Costs

The digital payment framework eliminates the requirement of physical infrastructure, paperwork, and manual handling. This reduces the cost of transactions for business enterprises and financial institutions. Also, digital transactions usually include a lower cost of transfer as compared to traditional banking methods.

6. Ease of Use

The payment systems facilitate customer comfort. The old cash-processing machines that could only recognise clear notes and coins are being replaced by ATMs, which are accessible and easy to use. Digital payment systems are easy to operate and will not take additional effort to understand how they work.

7. Low Fees

Digital payment methods typically entail lower transaction fees compared to banking methods, contributing to overall cost efficiency.

8. Boost Revenue

Merchants can benefit from a wider consumer base and better cash flow by utilising digital payment methods, leading to higher revenue. Digital payments offer an efficient system, leading to higher customer satisfaction and smoother transactions, which can attract more customers in the future.

9. Discounts and Savings

Many online platforms provide discounts, cashback, or loyalty programmes. These discounts motivate the customers to go for the digital payment option, which saves them money and provides several benefits.

10. Low Risk of Theft

Digital payments diminish the possibility of the actual loss of money since it’s not physical. Transactions occur in the digital world, therefore rendering the necessity of holding large amounts of currency physically unnecessary. This safeguards payments by preventing direct cash transactions and ensuring their protection.

11. Customer Management

Digital payment systems can frequently oversee and monitor the customers’ transactions, preferences, and feedback, which gives the business more control over these aspects. This improves overall customer management by adjusting service offerings based on customer behaviour.

12. Better Customer Experience

The ease and convenience offered by digital payments enable customers to enjoy superior service, thereby enhancing their experience. Simplified payment processes result in increased customer satisfaction and a greater likelihood of future collaboration with the business.

13. Efficient Record-Keeping Features

Through the digital infrastructure, digital payments for offline businesses are recorded efficiently; thus, the business environment is friendlier than before. Today businesses and individuals can easily track, control, and analyse their financial activities to obtain financial transparency and improve the financial management process.

Razorpay Payment Gateway: Your Digital Payment Partner

Razorpay is India’s first full-stack financial solutions provider and aims to enable all businesses, enterprises, entrepreneurs, and freelancers to adopt digital payment methods to grow their businesses. Razorpay Payment Gateway is the flagship product, providing holistic payment solutions to both big and small enterprises with the lowest payment gateway charges in the market. If your venture has a website or an app, then Razorpay Payment Gateway should be your go-to option. Some of the key features and benefits include:

• Accept all Payment Modes : Multiple options include domestic and international credit & debit cards, EMIs (equated monthly instalments), PayLater, net banking, UPI, and mobile wallets.
• Flash Checkout : Thanks to the option of saving cards, there is no need to type in the card details every time – saving time and increasing sales.
• Powerful Razorpay Dashboard : The dashboard provides efficient monitoring through reports, detailed statistics on refunds and settlements, and much more.
• Protected and Secured : The PCI DSS Level 1 compliance, with frequent third-party audits, and a dedicated internal security team ensures the safety of your data.
• Run Offers Easily : The Razorpay dashboard allows you to run every promotional offer at the click of a button.

Read More: What is Payment Gateway and How Does It Work?

More From the Razorpay Payment Suite

1. razorpay payment links.

Payment Links are one of the easiest ways to accept payments online. You can generate a link from the Razorpay dashboard or ePOS app and share it with your clients. By clicking the link, your customer can pay within minutes.

Razorpay payment links ensure safe money movement with100% secure ecosystem guarded with PCI DSS compliance. These are extremely simple to generate and require no prior coding or design knowledge. It offers more than 100 payment options to a customer, ensuring timely and accurate payment. 

2. Razorpay Payment Button

Since most businesses already have an online presence, we developed a product to integrate digital payments on an existing website. The Razorpay payment button allows you to accept payments on any website or webpage by adding a code line. Within five minutes, a customised code will be embedded on your website to start accepting payments.

Some of the key uses of a payment button:

• Add an integrated checkout on your website
• Start accepting fees without any integration or coding efforts
• Use one of the existing templates or create one of your own

3. Razorpay Payment Pages

For people who want to give information and receive payments simultaneously, Razorpay is a better alternative. With Razorpay Payment Pages , you can set up your venture’s mini-website in less than five minutes. Payment pages allow you to add your business information, showcase pictures, and accept payments – all in one. With our ready-to-use templates, you can accept payments for multiple payment modes.

4. Razorpay Subscriptions

Razorpay Subscriptions is a means to collect recurring payments without troubling the customer to intervene at each payment. This means that professionals can obtain a steady flow of fee payments without worrying about operational barriers. It ensures complete visibility and flexibility, and the customer can control his regular payments.

With the rise of digital payments, recurring payments via cards are becoming less popular. Thus, Razorpay subscriptions also bring with them the valuable features of UPI AutoPay . Under this feature, customers can set up recurring payments within minutes via their UPI app. 

Join India’s Journey Towards Digital Payments

The digital payment wave in India is not going anywhere. With financial literacy and accessibility on everyone’s mind, online payments will grow exponentially. As a business and a professional, this is the right time to onboard the digital payment wagon and enable your customers to transact online securely.

Frequently Asked Questions (FAQs)

1. do digital payments make you responsible.

Yes, digital payments make you responsible as a business owner or individual. When you choose to accept digital payments, you must ensure the security and integrity of the transactions. This includes protecting customer data, implementing secure payment gateways, and staying updated with the latest security measures to prevent fraud or data breaches.

2. Will digital payments replace all cash?

Despite the rise in popularity of digital payment in India, it seems unlikely that physical currency will be entirely phased out soon. Cash still holds significance in various instances and for low-value transactions.

3. Is electronic payment safe to use?

With advancements in digital payment technology, demographic shifts, and the evolving cyber-security landscape, online transactions are more popular and secure than ever.

4. Which digital payment methods are commonly used in India?

In India, popular digital payment options include UPI wallets such as Paytm and PhonePe, internet banking services, debit/credit cards, and AEPS. 

5. How has the government contributed to the growth of digital payments in India?

The Indian government has played a role in promoting payments through initiatives like demonetisation. This initiative aimed to reduce cash-based transactions while encouraging the adoption of electronic payment methods. The introduction of UPI by the NPCI has transformed how people conduct transactions.

6. What is the regulatory framework for digital payments in India?

Digital payment regulation in India is primarily overseen by the Reserve Bank of India (RBI). The RBI establishes rules and standards to ensure payment systems’ security, reliability and effectiveness. 

7. Can you provide examples of successful digital payment implementations in India?

Some notable digital payment initiatives in India include the BHIM app, which facilitates UPI-based transactions. Additionally, integrating Aadhaar with payment platforms has simplified authentication processes for individuals.

8. What are the future trends and innovations expected in the digital payments landscape in India?

Digital payments across India may involve adopting contactless payments, expanding UPI for transactions, integrating voice-activated payments, and emerging blockchain-driven payment solutions.

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Shubhangi is a Content Marketer at Razorpay. A marketing enthusiast, she loves writing about business strategy and technology. You will often find her reading Indian mythology, exploring Delhi streets and taking Buzzfeed quizzes.

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How India's Central Bank Helped Spur a Digital Payments Boom

October 27, 2022

Billions of transactions underscore gains from country’s unique partnerships

The Reserve Bank of India’s headquarters, opened in 1981, is a high-rise building clad in white towering over Mumbai’s Fort district, a few blocks from the waterfront.

The RBI is also a pillar of the country’s rapidly growing digital payment network and a lesson in cooperation between a central bank and private firms.

India’s digital payment volume has climbed at an average annual rate of about 50 percent over the past five years. That itself is one of the world’s fastest growth rates, but its expansion has been even more rapid—about 160 percent annually—in India’s unique, real-time, mobile-enabled system, the  Unified Payments Interface  (UPI).

Transactions more than doubled, to  5.86 billion , in June from a year earlier as the number of participating banks jumped 44 percent, to 330. Values nearly doubled in the same period. In addition, the RBI in March introduced a UPI for feature phones (older devices with buttons instead of touchscreens) that can potentially connect 400 million users in distant rural areas.

The UPI system was introduced in 2016. The shock of the demonetization initiative followed near the end of that same year, when high-denomination banknotes were withdrawn from circulation.

UPI was a response to the nation’s patchwork of rules and paperwork for payments. The goal was to make transfers easier and safer by allowing multiple bank accounts on the same mobile platform for individual and business use alike. It rapidly came of age.

The UPI network’s genesis traces back even further, to 2006, when the RBI and Indian Banks’ Association jointly formed the National Payments Corporation of India (NPCI).

The goal was to be an umbrella institution for digitalization of retail payments, and it was incorporated as a nonprofit company intended to provide India’s people a public good. This public good approach to providing digital financial infrastructure is relevant for all economies, whatever their stage of development, researchers at the Bank for International Settlements wrote in a 2019  paper .

Multiple payment systems

Growth for individual digital payment users is set to triple in five years to 750 million, according to NPCI Chief Executive Officer Dilip Asbe; merchant users could double to 100 million. The central bank fosters a  varied  ecosystem of payment systems, he said, including RuPay, a debit and credit card issuer with a large market share, the National Financial Switch cash machine network, and a payment system using the national identity program to bring banking to underserved areas.

“RBI was determined that a country our size needs multiple payment systems so citizens can choose from multiple payment options,” he said. “A system like UPI cannot come into any country unless the central bank and the government of that country are keen to bring in such an innovation, which democratizes the payment system to the smallest value and the most reasonable cost. UPI is nearly free today for consumers in India, and the government is providing incentives for promotion of UPI merchant payments.”

With a burgeoning cashless society, the old ways are increasingly forgotten by the country’s hundreds of millions of young people. It is they who have helped swell the ranks of users of Paytm, one of the world’s largest mobile money services providers, to more than 400 million.

Anjchita Nair, an entrepreneur and cofounder of the New Delhi–based arts and culture organization  Cultre , uses Paytm for sales and Razorpay’s platform for online transfers. For personal use she prefers Google Pay, another of India’s most popular platforms.

“Monetary transactions can be done quickly and conveniently,” she said. “The younger generation are more and more using cashless methods such as UPI and wallets, and we wanted to make transactions easier for them. We also have small-value transactions happening for some of our products, and it reduces the hassle of handling cash.”

With the memory of cash reliance already rapidly fading since the beginning of the smartphone era, the pandemic helped further accelerate the embrace of contactless digital transactions, especially for small amounts, as people tried to protect themselves from the virus.

Open-stack technology

This transition piggybacked on another unique domestic innovation, the  India Stack , a digital identity and payment system built on an open application programming interface, or API. It has been a force for greater financial inclusion by making services easier for consumers to access, including by incorporating the national identity program, Aadhaar, with  1.3 billion  users.

Open-stack technology is the foundation of UPI, which transformed India’s digital payments, said Dinesh Tyagi, CEO of CSC e-Governance Services India, the government’s operator of centers for electronic public services in villages and other remote areas.

“The government promoted open-stack technology so that people can try to integrate very quickly,” he said. “We also promoted private fintech companies, in addition to traditional public sector banks, which is what [allowed] quicker adoption of these technologies. These services are also available at no cost to the citizen, and that is the uniqueness of India’s digital transformation.

Meanwhile, policymakers are planning another big bet on the future of digital money, with even more far-ranging effects on the economy. The RBI is exploring a central bank digital currency (CBDC) designed to meet monetary policy objectives of financial stability and efficient currency and payment operations.

RBI Deputy Governor Rabi Sankar, who oversees payment systems and financial technology, said achieving such an advance would have advantages for currency management, settlement risk, and cross-border payments.

He said in a June  address  at an IMF event on digital money that a digital rupee would have big implications for crypto assets: “CBDCs could actually be able to kill whatever little case there could be for private cryptocurrencies.” 

Jeff Kearns is on the staff of  Finance & Development .

Ashlin Mathew is a writer based in New Delhi, India.

Editor’s note: This article  first appeared  in the most recent issue of  Finance & Development .

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• Cashless India Essay

An Introduction to Cashless India

A cashless India is the first step towards making the dream of digital India a reality. In this cashless India essay, we will be talking about the meaning of ‘cashless’, the different alternatives for our monetary system, and the disadvantages and advantages of a country going fully cashless and digital in its economy. The following cashless India essay in English is for students studying in class 5 and above. The language here has been kept simple for a better understanding of young students. This essay on the cashless economy in India would enable young students to write an essay on the cashless economy in India on their own. 

As we know that cashless India is the new India and with the decision made by our honourable prime minister to demonetize money used previously, this concept of going cashless has become very popular. Although there are some disadvantages of going cashless, along with that there are more benefits as well. In this essay, you will know about everything that will help you to get better information about the concept of India going cashless. 

Essay on Cashless India

On the evening of November 8, 2016, at 8 P.M., Narendra Modi, the Prime Minister of India announced the demonetization of 500 and 1000 rupees notes in India. That historic decision had many reasons. One of the reasons was laying the stepping stone towards the dream of a cashless India.

The traditional form of monetary transactions happens with the exchange of physical hard cash between people. Cashless India is going to make it almost redundant. This idea has got a huge amount of push due to the ongoing COVID-19 pandemic, given the concerns with the exchange of physical cash. There are a lot of advantages to going cashless. Remember that everything has a positive as well as a negative aspect. It is not that there won't be any disadvantages of going cashless but the thing is that you tend to find the ways by which you can prevent these disadvantages from harming you. All that you need to do is be more careful. As we all know, prevention is always better than cure.

First of all, let’s understand the meaning of a cashless economy. A cashless economy is one in which the liquid transactions through the system happen with the exchange of plastic currency or through digital currency. ATM debit and credit cards are plastic currency and online payments come under digital currency. The advent of blockchain technology has redefined the meaning of a cashless economy through bitcoins. A decentralized system of finance is defined by the concept of bitcoins, but we are not focusing on that in this particular essay on cashless India. We are more focused to discuss why India needs to go cashless and what are the benefits that will come with India taking on this new change. This essay provides you with information on the advantages and disadvantages of the digital payment system also. It is not that you are not going to face any problem in online transactions, you must have heard that a coin has two sides and just like that, this topic of cashless India also has both pros and cons. Let’s move on to the pros and cons of a digital payment system.

We can see the Three Main Advantages of Cashless India.

Reduction of Black Money

Black money is the money that is earned but not accounted for in taxes. That money is hidden by people from paying taxes. This black money is an illegal instrument in an economy that is capable of reducing a government down to bankruptcy. The cashless economy will ensure there’s no black money since unlike hard cash digital money cannot be hidden. At least there is no way yet that could make the hiding possible. Digital money enables governments to track all transactions in an economy that helps keep the income authentic and transparent. The technology behind the digital economy has to be well updated and sturdy though.

Transparency

India has corruption inbred in its system starting from the ministerial level to the watchman level. And it exists due to the lack of transparency in our monetary system. In an economy that is as big as India, transparency is a huge issue. We have learned of scandals like the CWG or 2g scams or the Rafale Jet scams over the years, and these scams are a result of the lack of transparency in transactions. It’s a shame that a small cashless economy in India essay would never do justice to the topic since it will never be enough to write about all of the corruption scandals India has had since its independence. Corruptions of this scale could be brought down to a large extent if we could achieve that dream of a cashless economy throughout. And it's possible because the origin and endpoint of a transaction could easily be tracked in a cashless economy and that’s the biggest advantage.

There are Two Major Disadvantages of Cashless India.

Online Theft

With the improving technology every day, there’s a rampant increase in online cheating and fraud episodes. If the government is unable to achieve sturdy and not-possible-to-hack digital systems, in a country like India with a 135 crore population, it is completely impossible to make the economy cashless. People are still afraid of making big transactions online after watching the reports of online thefts on national news channels.

Infrastructure, or the Lack of it

Not just the government infrastructure, it requires infrastructure on an individual level too. A gadget or a smartphone, data connectivity, and electricity for charging the phones regularly are the basic requirements for making online transactions possible. These are privileges that exist mostly in urban India and most of rural India is still deprived of these privileges. The government should first fix this before even dreaming of making a cashless India possible.

The Government of India took the whole country by storm by announcing the demonetization on 8th November 2016. 500- and 1000-rupees notes were no longer legal tender. This move was aimed at getting rid of the black money in the economy that was largely used to fund criminals and terrorists and formed a parallel economy. The acute shortage of cash led to long queues outside ATMs and banks trying to withdraw cash or exchange notes. This was all to initiate the fruition of a dream of cashless India.

With the enormous amount of technological revolutions happening, it is close to impossible to find people without a smartphone in these times. Almost every citizen possesses a smartphone. The ease of transaction through interfaces like GooglePay or PhonePe or Paytm has never been more seamless than this. The Indian government has also introduced interfaces like UPI or Unified Payments Interface for hassle-free digital transactions that are fully cashless.

In recent years, we have been asked to be in very less contact with each other. This is because of the communicable diseases of Covid-19 that have seen an adverse effect throughout India. For this reason, online payments have recently been the most popular means of transaction. The money will directly get transferred to the account of the user from our account; all you need to do is just download the app that you can use for the transaction. 

In the end, the demonetization step became crucial to start a cashless economy in the country. It has paved the way towards an economy in India that is defined by greater transparency and convenience and ease in monetary transactions.

FAQs on Cashless India Essay

1. Which Country is fully cashless?

There are a lot of benefits of going cashless and most of the benefits are discussed over here. Now the world is more focused on how to go cashless as they are well aware of the advantages that they will have after going cashless. This is the reason that most of the countries are seeking some changes and making constant efforts to make their country cashless. Going cashless will improve technologies and will also increase your economy. That is also one of the main reasons why this world is more focused on going cashless. Sweden could achieve a near cashless economy in the world.

2. Name the different Digital Currencies in the world?

Just as in terms of cash, we have rupees or dollars or pounds and so on. In the same way, it is not like only one kind of digital currency is used throughout the whole world. There are different kinds of currencies that the world uses for online transactions. Litecoin, Bitcoin, Ethereum are some of them that were found to be in existence as of 2020. You need to have good knowledge about these currencies and then you can easily transfer the money. 

3. What are the apps that you can use to transfer money directly into another person's account in India?

In India going cashless is the new normal. People are using online money apps such as Google pay, Paytm, Payz app, PhonePe to make the transactions directly through their phone and bank account but when we talk about the currencies being used currently, Indians are more preferably using bitcoins as their online currency. India is now making efforts to go cashless and increase its economy.

4. How much is India cashless now?

In recent years, at the time of Corona, it was advised to people not to make contact with each other. It was at that time that the cashless India concept was created and the apps like Google Pay etc came into existence. The app was introduced in India before it came into use. In the covid time, most people used the cashless way of payment. The census has proved that 37% of India has not paid using cash since the Corona times.

5. Is it possible to have cashless India anytime sooner?

Given the regency usage and increased usage of the apps such as Google pay and Paytm and the increase in the number of vendors who have accepted this method of online payment, the more India can be cashless. The most difficult thing will be to make the people of India agree to use these online methods of payment and move toward increasing the other economy of India. India too can be cashless; it is just that we need to create awareness among people regarding this.

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From AI to UPI, PM Modi- Bill Gates discuss India's digital revolution: ‘Indians leading the way’, Microsoft boss says

Bill gates praised indians for their ability to adopt technology fast as well as lead the way during his chat with pm modi..

Prime Minister Narendra Modi and Microsoft co-founder Bill Gates discussed a wide range of issues from Artificial Intelligence to Digital Public Infrastructure and efforts to combat climate change in a free-wheeling chat on Friday at PM's residence. In the conversation, Bill Gates praised Indians for their ability to adopt technology fast as well as lead the way while PM Modi encouraged the Microsoft boss to take a selfie using the Photo Booth on PM's Namo App.

Read more: Bill Gates on his India visit, PM Modi meet: ‘Can’t wait to go back’

Pm modi-bill gates talk about 2023 g20 summit.

Discussing the 2023 G20 Summit which concluded last year under India's presidency, PM Modi said, "We had extensive discussions before the G20 Summit and as you might have seen, the Summit's proceedings took a lot of turns. I believe we have now aligned with G20's core purposes & objectives, bringing them to the mainstream. I hope your first-hand experience echoes this sentiment."

Watch snippet here:

Bill Gates responded, "G20 is way more inclusive and so it is fantastic to see India hosting it - really raised things like digital innovations and how the south-south collaboration can be far more than just the dialogue with the north...Our foundation is so excited about the past results that you have achieved here in India, that we would be a partner in trying to take that into many other countries."

Read more: Bill Gates on AI's limitations: ‘Can’t even solve a Sudoku puzzle so not good…'

Pm modi-bill gates on india's digital revolution.

Talking about the digital revolution in India, PM Modi said, “During the G20 Summit in Indonesia, representatives from around the world expressed their curiosity about the digital revolution in the country. I explained to them that we have democratised technology to prevent monopoly. It is by the people and for the people.”

Bill Gates praised India and said that the country has a “digital government”. He said, "India is not only adapting technology but it is actually leading the way."

Read more: Bill Gates ‘jealous’ of this quality that Steve Jobs had: 'I'll never…'

Pm modi tells bill gates about 'namo drone didi' scheme.

PM Modi told Bill Gates about 'Namo Drone Didi' scheme and highlighted the ways in which it is helping in promoting technology in the country, specifically among women.

He said, "When I used to hear about the digital divide in the world, I used to think that I would not allow anything like that to happen in my country. Digital public infrastructure is a major requirement in itself...Women are more open to adopting new technology in India...I have started 'Namo Drone Didi' scheme...This is going on very successfully. I interact with them these days, they are delighted. They say that they didn't know to ride a bicycle but they are now pilots and can fly drones. The mindset has changed."

‘AI is very important’, PM Modi says

PM Modi also told Bill Gates how he AI was used during 2023 G20 Summit. He also shared that his Hindi speech was translated into Tamil during Kashi Tamil Sangamam event using AI.

PM Modi said, "Historically, during the first and second industrial revolutions we lagged behind because we were a colony. Now, in the midst of a fourth industrial revolution, the digital element is at its core. I am confident that India will gain a lot in this. AI is very important. Sometimes, I jokingly say that in our country, we call our mother 'Aai'. Now I say that when a child is born, he says 'Aai' as well as AI as children have become so advanced."

When not reading, this ex-literature student can be found searching for an answer to the question, "What is the purpose of journalism in society?" ...view detail

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Digital payments and consumer experience in India: a survey based empirical study

Sudiksha shree.

1 Mumbai School of Economics and Public Policy, University of Mumbai, Mumbai, India

Bhanu Pratap

2 Department of Economic and Policy Research, Reserve Bank of India, Mumbai, India

Rajas Saroy

Propelled by recent policy initiatives and technological developments, India’s digital payment system is a promising success story in the making. At the same time, the data also points towards an increasing usage of cash. While aggregate country-level data can indicate overall preferences of citizens, we use a novel online survey-based dataset to understand how factors such as ‘perception’ and ‘trust’ in digital payments, and experience with online frauds, affect the payment behaviour of consumers. While demographic factors like age, gender and income are relevant factors which determine this choice, we find compelling evidence that a person’s usage of digital payment methods is influenced by her perception of these instruments, as well as her trust in the overall payments framework and banking system in general. We find that the degree to which past-experience with online fraud deters usage of digital payments varies with the purpose of the transaction.

Introduction

The consensus around the origin and the forms of ancient money has kept changing over the course of recorded history. But, what has not changed over the years is what money does; broadly, it facilitates trade in goods and services as medium of exchange and acts as a credible store of value. Modern day trade demands massive payments to be settled fast over long distances with minimum transaction cost. Evidently, to suit these needs the payment systems are being digitised globally. Cash, however, remains a crucial part of the trade. Therefore, the discourse on the current age payment system revolves around cash vs digital transactions.

While cash might seem convenient as it’s ingrained in our habits and is still readily accepted at more places, digital payments offer convenience by saving time and labour. There are further issues with cash use. While it provides a suitable alternative to aid the informal or parallel economy [ 3 , 21 ], digital payment offers itself as a desirable tool for institutions to fix this problem of traceability. In fact, governments around the world have taken drastic measures at huge costs to clear markets of ‘black money’. Research in the behavioural sciences conveys that people experience higher ‘pain of paying’ when paying in cash than digitally, and this contributes to deferred payments [ 17 , 19 , 20 ]. While cash may not seem to impose any direct transactional cost like digital money, it is still costly for both governments and end-users. A 2014 study found out that residents of Delhi spent around 6 million hours and ₹91 million to access cash, while the Reserve Bank of India (RBI) and commercial banks together spent about ₹210 billion towards currency related operating expenses in the same year. But on the other hand, there are also huge implicit costs to digitise the existing systems and nudge people to change [ 14 ].

In the last decade, India has rapidly digitised its payment systems and promises huge potential in the area. Digital payments recorded an increase of 46.5% in total volume in FY19 on top of an increase of 60.6% in FY18. The Unified Payments Interface (UPI), a payment system that was launched in 2016, has surpassed the milestone of a billion transactions per month. The progress in digitisation has been driven by a healthy mix of technological innovation, policy interventions, and expansion and strengthening of existing infrastructure on the supply side, coupled with an increasing proportion of the population adopting financial and digital instruments on the demand side. The government of India and the RBI have been working in synergy to push for policy and regulatory reforms. Enablers such as Jan Dhan accounts, Aadhaar and penetration of mobiles, and policies like Demonetisation and Goods and Services Tax have brought people closer to technology and banks. Recently, NEFT (National Electronic Funds Transfer) was made operational for 24 h on all days of the week, and RTGS (Real Time Gross Settlement) is expected to follow soon. The launch of UPI, along with already available digital payment modes like NEFT, IMPS, cards and Prepaid Payment Instruments (PPIs) has increased the options available to the consumer. The number of PoS (point of sale) terminals have also increased by about 40 lakhs in the last five years. PoS terminals and lightweight acceptance infrastructure such as QR codes have boosted Card/PPI based payments. Additional payment systems such as Bharat Bill Payment System (BBPS), National Electronic Toll Collection (NETC) system, RuPay cards and AePS have also boosted digital payments and the intent to incorporate modern-day technologies such as tokenisation and contactless payments will further the progress.

Despite this progress, cash use still seems to be on the uptick in India. Our paper seeks to highlight the important factors at the individual level, which influence the consumer’s decisions to use cash or digital payment. While it is critical to push for technological innovations and policy reforms, it is also imperative to understand the aspects that motivate or hinder the adoption of these technologies by the end-user. A recent survey [ 5 ], on the readiness of consumers towards adoption of newer payment technologies, ranked India second out of 27 economies on the FinTech adoption Index. Research conducted at the individual consumer level can provide an insight to understand how certain aspects are at play while making a payment decision. To this end, we use a comprehensive and multidimensional online survey which addresses many hitherto untouched dimensions of this topic, such as the difference in digital spending over various expenditure categories (groceries, e-commerce, utility bills, etc.), the choice of consumers to go purely digital or exercise a mix of cash and digital options, and the effect of psychological factors like perception and trust.

There is a dearth of studies and data covering the behavioural aspects at individual level that have an impact on choice of payment behaviour in the Indian economy. Given the massive heterogeneity of our population, different samples might produce disparate results. The High-Level Committee on Deepening Digital Payments [ 15 ] recommended that there should be periodic surveys to gauge user experience and attitude towards digital payments. The present study, is a small step towards filling the research gap in the context of such analysis.

Our key findings point towards a significant impact of perception of the payment system on how people choose to pay. Not only does a positive perception motivate people to go ‘digital’, but a relatively negative outlook on cash also has a similar impact. This finding is important in light of increasing cash use at the macroeconomic level in the country. Another significant factor is confidence in the payment system. Respondents who trust the service providers and regulators seem to have a greater likelihood of paying digitally. We find inconsistent behaviour when studying the impact of experience of digital payment fraud on choice of payment tool. The impact that experiencing such a fraud has on the choice to pay digitally differs according to the purpose of the transaction. The remainder of the study is presented in five sections pertaining to existing literature, data and methodology, sample summary statistics, empirical findings and conclusion and policy implications.

Related literature

The terms digital transaction, electronic transactions, paperless transaction or cashless transaction are almost used interchangeably in common parlance. The RBI Ombudsman Scheme for Digital Transactions (2019) defines digital transactions as “a payment transaction in a seamless system effected without the need for cash at least in one of the two legs, if not in both. This includes transactions made through digital/electronic modes wherein both the originator and the beneficiary use digital/electronic medium to send or receive money”. However, in our paper, a digital transaction is one where the payer and payee both use digital modes of payment.

Policies in many parts of the world are being designed in favour of non-cash payments because of the various problems that cash poses. Cash fuels the parallel or black economy, therefore, phasing it out might solve this problem, especially with large denomination notes [ 20 ]. The cost of printing, destroying and other cash related operational expenses in India are estimated at 1.7% of GDP [ 23 ]. Cash, however, remains a significant part of all the transactions in most countries [ 6 ].

While reading into data on the macro-level can give us a broad idea of people’s overall preferences, data at the individual level gives us an insight into how certain factors impact the choices/decisions consumers make regarding the mode of payment. Following this line of thought, several studies have analysed such issues at the level of the consumers. They reveal that the choice of payment method is impacted by a host of consumer-specific and technological factors. Transaction size has a significant impact on what mode of payment people choose. A cross- country comparison of payment diary survey data of seven countries showed that cash was the preferred mode of payment for smallest 50% and largest 25% of transactions [ 2 ]. In another study, social marginal costs were computed for various instruments for small and large transaction sizes and it was found that for larger transaction sizes, there were significant differences in cost for electronic vs non-electronic payments [ 8 ]. Studies show that demographic characteristics also play a significant role in how people choose to pay. It was found that better education and higher income lead to lower cash use compared to non-cash modes. Certain categories of age show a stronger preference for digital payments Bagnall et al. [ 2 ].

Consumer perceptions on safety/risk, convenience/ease of use, anonymity and costs have been shown to affect payment systems adoption significantly. Png and Tan [ 16 ] show that concerns about privacy emerged as one of the main psychological factors causing a bias towards cash for retail transactions. Kahn et al. [ 10 ] show that business in the unorganised economy was attributed to transactions that could be made in cash and did not reveal the agent’s identity. Bagnall et al. [ 2 ] analysed data from cross-country consumer diary surveys and found that consumers who rated cash high on ‘ease of use’ ended up using it more. In a study assessing payment perception of Dutch consumers, non-price parameters such as ‘acceptance’, ‘convenience’, ‘transaction speed’ and ‘safety’ were used to gauge the perception of payment instruments used at PoS terminals [ 9 ]. Several studies have used the Technology Acceptance Model (TAM) to show ‘perceived usefulness’ and ‘perceived ease of use’ have a significant impact on behavioural intention and thus, actual use of electronic payment systems [ 12 , 18 ].

Perceived trust in the payment system is shown to have a positive effect on the usage of digital modes of payment [ 13 ]. While the central bank and banks are traditional regulators and service providers of payments systems respectively, non-banks have also emerged as new players in the framework. A recent empirical study conducted by the Monetary Authority of Singapore [ 16 ] found that trust in banks impacts the nature of the transaction. A cross-country analysis shows that residents in countries that reported lower trust in banks preferred cash for making transactions. In some cases, while an increase in trust can lead to the opening of accounts, it might not translate to actual usage of those accounts [ 7 ]. Central banks also play a pivotal role in ensuring safety, integrity and stability of the payments system. Experience of online fraud can shape beliefs of perception and trust and can have a direct impact on payment behaviour. Media coverage of these incidents is shown to affect card payment [ 11 ]. The direction, strength and frequency of media coverage affected debit card use. Few studies show that people simply use digital modes of payment because they have exhausted their stock of cash in hand. It is called ‘cash first’ or ‘cash-burning’ and is perceived to be an optimal policy by the consumer [ 1 ]. Some studies also point that people still pay in cash simply because it is difficult to grow out of habits [ 9 ].

Survey data and empirical methodology

For the purpose of this study, primary data is collected using a structured questionnaire circulated online (Appendix 1). Following snowball sampling, the survey was shared on various social media platforms for better reach. The questionnaire was drafted in English and Hindi, to both expand and diversify the sample. It consists of 28 questions that are divided into seven sections viz. demographics, access to and usage of technology, awareness of different modes of digital payment, preference and perception on cash and digital payment systems, spending habits, experience related to fraud, and feedback on awareness campaigns.

Our study broadly aims to understand the impact of user perception, trust in payment systems, and experience of online fraud on the choice of mode of payment. For regression analysis, mode of payment is taken as the dependent variable and the independent variable is added to a baseline model according to the hypothesis being tested. Firstly, a baseline model is obtained for all five types of purchases—grocery, utilities, online shopping, durables, and gold. These transactions range from low to high value transactions. The responses recorded for different types of purchases have the following three alternatives:

• Always pay in cash,
• Always pay digitally, and
• Sometimes pay in cash and sometimes digitally.

Since the dependent variable is categorical and has more than two categories, a multinomial logistic regression is best suited for regression analysis. A multinomial logit model is an extension of logit model, with more than two categories, in no particular order. Maximum likelihood estimation is used to obtain the parameters of the model.

Let the model have j  = 1, 2 …, J categories for the dependent variable y , and X be the matrix of independent variables. In a multinomial logit model, we estimate a set of coefficients β j  = ( β 1, β 2…, β J ) corresponding to each outcome j . Setting j  = 1 as the reference or base category ( i.e ., β 1  =  0) , we have:

The parameters of the model are reported in terms of odds or log odds. Given any two possible categories for the dependent variable:

• y  = 0 for cash (reference)
• y  = 1 for digital payments
• y  = 2 for sometimes cash and sometimes digital payments

The following multinomial logistic model is estimated:

The parameter β kj is a vector of β 0j, β 1j … β kj where j ( j  = 0, 1, 2) is the category of dependent variable and there are K  +  1 ( k  = 0, 1, …, K ) independent variables. Since cash is the reference category, β k0 is set to 0. Therefore, β k1 and β k2 are respective log odds relative to the reference category.

Since, all the independent variables are categorical, they are coded as dummy variables. The reference categories for each of the independent variable in the baseline model are mentioned in the first column of Table ​ Table1 1 below.

Demographic variables

Next, we add four additional independent variables of interest to the baseline model one by one, to observe the impact of perception (of both cash and digital payment modes separately), confidence in the payment system and fraud experience on the choice to pay digitally.

The perception of cash and digital modes of payment is recorded for four parameters- cost, convenience, safety and privacy/anonymity on a three-point Likert scale with the alternatives ‘bad’ (0), ‘okay’ (1) and ‘good’ (2). The mean score for perception is computed as the simple average of parameter-wise scores for cash and digital payments. Confidence in payment systems is measured on the parameters- trust in the RBI, trust in your payment service providers (e.g. FinTechs) and trust in stability and integrity of your bank. A five-point Likert scale is to measure responses, ranging from strongly agree (0) to strongly disagree (4). The mean score is computed as a simple average of the four parameters. Online fraud experience is quantified based on familiarity with such incidents. The respondents were asked to choose from following alternatives-

• I have been a victim to digital payment frauds.
• I have received such calls/mails/texts but carefully avoided them.
• I have not received such calls/mail/texts but know someone personally who has been a victim.
• I have not received such calls/mail/texts and do not know anyone personally who has been a victim.

Sample summary statistics

A snapshot of our sample of 640 respondents is given in Chart  1 . The respondents are mostly male and educated. Most of them are either salaried employees, working in the government or private sector. This may be due to the online nature of the survey, and circulation limited to the social circles of the authors, which occurred due to the enforcement of the COVID-19 induced nationwide lockdown in India during the survey period. Responses were received from twenty states of India. The corresponding districts were divided into three tiers according to the HRA (Housing Rent Allowance) classification by the Department of Expenditure, Government of India.

Demographic characteristic of the sample

The responses are summarised in Appendix 2. Awareness as well as usage regarding various digital payment instruments were high in the sample. It is important to keep this in mind while interpreting how payment behaviour is affected by other variables. Our respondents, being from the relatively well-off sections of society, were much more aware and comfortable with cards and UPI, rather than AEPS and USSD code-based payments. Digital mode was preferred for online shopping, paying utility bills, and purchasing durables (mostly medium to high value transactions). A combination of cash and digital modes was preferred for purchases of grocery and gold, which are starkly different in terms of transaction value. Being solely dependent on cash was relatively less preferable for all purposes.

The perception of cash and digital payments are recorded on four parameters viz., ‘convenience’, ‘cost of payment’, ‘safety’, and ‘privacy/anonymity’. It is observed that on an average, digital payments perform better than cash on all four fronts. Confidence in digital payment systems is assessed on four parameters, with regards to banks (preference for depositing money in a bank, as well as trust in one’s own bank), the central bank and in other participants like payment aggregators. Respondents seemed more confident in the RBI and banks, as compared to other service providers.

Technical issues, followed by low acceptance and lack of trust were identified as the major hindrances with digital payments. The experience of online fraud is divided into four categories based on their potential intensity of impact of the fraud. Out of 630 respondents that answered the question, 532 have had some experience of online fraud. Out of 411 respondents who had experienced the incident personally, a majority (279) reported no change in the nature of payments and only 26 mentioned that either they had completely switched to cash or had reduced the use of digital mode of transaction. Respondents were also asked if they reported the incident to the concerned authority after they experienced the fraud personally. Most of the respondents did not report the incident, especially if they had not faced any losses.

Multinomial regression model: results and analysis

The baseline model (Appendix 3) provides insights on the effect of demographics on the choice of mode of payment.

Effect of demographics on mode of payment

Males are more likely to use digital modes of transaction as compared to their female counterparts for both purely digital or a combination of cash and digital instruments. With respect to age, there is pressing evidence in the case of online shopping that older individuals are less likely to pay digitally. While the coefficients are not statistically significant for other kinds of purchases, their signs support this general observation. Education is also seen to have an enabling effect on people when it comes to going digital. The tendency to avoid paying solely with cash for groceries and utilities dwindles with an increase in the level of education of the respondent. Income levels have a statistically significant, positive impact when it comes to online shopping and gold purchases through the exclusively digital payment route. Lower income groups may prefer paying using cash on delivery. Occupation and place of residence have a significant impact on choice of mode of payment for mid and high-value transactions. Homemakers, unemployed and self-employed respondents are least likely to pay digitally. For place of residence, respondents living in Tier-1 cities are more likely to pay digitally.

In general, our results point out that more affluent and privileged groups are still more likely to go digital, compared to disadvantaged groups. Hence, while efforts to expand relevant infrastructure and nudge behavioural change are welcome, an upliftment of the general standard of living of the public, education and urbanisation may also be important ways to promote digitisation of payments.

Experience of online fraud

The experience of digital payment fraud is measured on a scale of four, with ‘0’ implying ‘I have been a victim of digital payment fraud, which is the highest possible impact of fraud on a person. At the other end, ‘3’ stands for ‘neither experienced digital payments fraud nor know anyone who has been a victim’. The baseline model is augmented with these additional categorical variables, and the results are presented in Table ​ Table2. 2 . The reference category for the four fraud indicator variables is the response ‘3’, i.e., the respondent has neither been a victim of digital payment fraud, nor do they know of someone who has. Our paper highlights that frauds have differential impact based on the purpose of the transaction. For grocery payments, experiencing such frauds, first hand or otherwise, seems to demotivate people from using digital payment modes, but there is no such evidence for other types of transactions. In fact, respondents preferred using a mix of digital payments and cash for utilities and durables even if they had previously fallen prey to such frauds. It may be easier for consumers to switch to cash for grocery purchase, as compared to settling utility bills or buying durables.

Experience of Online fraud

* p  < 0.1; ** p  < 0.05; *** p  < 0.01

Perception of cash vs digital payments

Perception of cash is scored on four parameters- cost of payment through cash, convenience of payment, privacy or anonymity concerns about the payment, and safety of payment. The scores range from 0 (bad) to 2 (good). The total score is computed by taking an average of all the four parameters. The total score is a continuous variable and is added to the baseline model. The resultant coefficient is reported in log odds. As is evident from Table ​ Table3, 3 , perception of cash has a strong and significant impact on which mode of payment is chosen by the respondent. As the perception of cash improves, the likelihood of paying digitally decreases across all purchase categories. The reference alternative for payment is taken as payments made only/ always in cash, implying no (zero) relation with perception of cash. As perception improves the likelihood decreases most for grocery (low-value payment) and online payments and least for payments made for purchasing gold followed by durables, both high-value payments.

Perception of cash

DP digital payments

On the flip side, we also consider the total score for perception of digital payments, which is calculated similar to that for cash above. The coefficients (Table ​ (Table4) 4 ) are positive and statistically significant, implying that as perception improves, so does the likelihood of paying digitally. Here also, the reference alternative is using only cash. In terms of magnitude, the perception variables seem to affect grocery spends the most and gold spends the least. It can be inferred that a positive outlook on digital payment modes motivates the respondent to pay digitally. However, digital payments still have a long way to go if they are to prove themselves as good substitutes to the cheapness, convenience and privacy of cash use. Another observation from the above results is that high-value payments (gold and durables) are relatively less affected by perception of modes of payment, when compared to low- value payments (grocery).

Perception of digital payments

Trust in payment system

Besides their perception of payment modes, respondents were also asked about their trust or confidence in the payment system as a whole, which was measured on four parameters. A five-point Likert scale is used, with ‘0’ or ‘strongly agree’ implying high confidence in the payment system and ‘4’, which stands for ‘strongly disagree’ implying extreme lack of confidence in the payment system. The total score is computed by taking an average of scores obtained on all the parameters. As expected, a deterioration in consumer confidence in digital payment systems (or an increase in the ‘lack of trust’ score) worsens the likelihood of paying digitally (Table ​ (Table5 5 ).

Trust in the payment system

At the end of the survey, respondents were also asked to give their feedback on digital payments. This gives us an indication of overall sentiments and main concerns of consumers towards digital payments. In Chart  2 , a ‘ wordcloud ’ based on 50 most frequently occurring words in the feedback highlights that consumers favour the ‘convenience’ offered by digital payment methods and have an overall positive sentiment towards such technology-based inventions.

Textual analysis on feedback

While governments, regulators and service-providers are working in synergy to enhance the electronic payments systems and related infrastructure, it makes sense to study how these options are perceived by the end-user. The key policy recommendation from our study is that incorporating feedback and gauging public perception can further catalyse digitisation. We observe through our study that perception of digital payment instruments affects the payment behaviour of an individual. Digital payments were not only driven by a positive outlook on digital payments but also a negative outlook on cash. Contrary to popular belief, customers were seen to be willing to discount online fraud experience in the face of higher convenience offered by digital payment modes. The impact of experiencing fraud on the choice to pay digitally differs according to the purpose of the transaction. Also, we cannot ignore the role played by demographic factors in better digital payment adoption. Digital payments adoption is expected to increase in line with the overall socioeconomic development of the population.

While our collected data is from a geographically diverse set of respondents, it is still limited to a certain part of the population. The data has been collected during a country-wide lockdown and therefore could only include respondents who were willing to fill the survey online (English or Hindi). Thus, most of the respondents were already digitally literate, educated and economically sound when compared to the population. This is one of the major limitations of the study. Further, since responses were collected in extraordinary circumstances of nationwide lockdown, they may be biased in the sense that these were times when many were compelled to pay digitally for fear of contracting COVID-19. Also, e-commerce and technology firms (with higher acceptance of digital payments) had stepped up their services, filling in the vacuum created by closure of brick and mortar stores. Various central banks around the world conduct payment diary surveys to gauge useful variables at the individual level and observe their impact on payment behaviour. In the future, surveys like these could be taken up with a broader sample and in a more structured manner, as things gradually return to normal.

Survey on consumer experience and perception about digital modes of payments: questionnaire

See Appendix Tables ​ Tables6, 6 , ​ ,7, 7 , ​ ,8, 8 , ​ ,9, 9 , ​ ,10, 10 , ​ ,11, 11 , ​ ,12 12 .

A. Demographics

B. Access to and usage of technology (mobile phone, computer and internet )

C. Awareness on different modes of digital payments, risks related and savings/investment instruments

D. Preference and perception on cash and digital payment systems

E. Behavioural aspects/habits of spending

F. Experience related to fraud

G. Feedback on awareness campaigns

See Appendix Fig. ​ Fig.3 3 . 

Data summary

See Appendix Table ​ Table13 13 .

Regression Table for Baseline Model

The views expressed are those of the authors and do not necessarily reflect the views of the Reserve Bank of India.

Contributor Information

Sudiksha Shree, Email: moc.liamg@571idus .

Bhanu Pratap, Email: ni.gro.ibr@patarpunahb .

Rajas Saroy, Email: ni.gro.ibr@yorassajar .

Sarat Dhal, Email: ni.gro.ibr@lahdcs .

Essay on Digital India

Students are often asked to write an essay on Digital India in their schools and colleges. And if you’re also looking for the same, we have created 100-word, 250-word, and 500-word essays on the topic.

Let’s take a look…

100 Words Essay on Digital India

Introduction to digital india.

Digital India is a campaign launched by the Indian Government to ensure that government services are made available to citizens electronically. It aims to digitally empower the country.

Objectives of Digital India

The main objective of Digital India is to provide all services electronically and improve the way citizens interact with the government. It aims to make India a digitally empowered society.

Impact of Digital India

Digital India has made services like banking, education, and healthcare easier to access. It has also created job opportunities and improved the economy.

Digital India is a significant step towards a digital future. It has the potential to transform India into a digitally empowered society.

Also check:

• Advantages and Disadvantages of Digital India
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250 Words Essay on Digital India

Introduction.

Digital India, a flagship program initiated by the Government of India, is a transformative campaign that aims to digitally empower the country and bridge the digital divide. This initiative, launched in 2015, seeks to ensure that government services are made available to citizens electronically, thereby improving the quality of life through digital means.

Objectives and Implementation

The three core components of Digital India are digital infrastructure as a utility to every citizen, governance and services on demand, and digital empowerment of citizens. The program’s implementation is centered around these pillars, focusing on providing high-speed internet as a core utility, ensuring secure cyberspace, and granting universal digital literacy.

Impacts and Outcomes

Digital India has had significant impacts on various sectors. The digitalization of services has led to increased transparency and efficiency, reducing corruption and improving service delivery. The digital literacy drive has empowered citizens, especially in rural areas, to access and use digital services.

Challenges and Future Prospects

Despite its successes, Digital India faces challenges such as digital illiteracy, lack of infrastructure, and data security issues. However, with continued investment and focus on these areas, the initiative has the potential to transform India into a digitally empowered society and knowledge economy.

Digital India is a revolutionary step towards creating a digitally inclusive society. It has the potential to redefine the relationship between the government and its citizens, making governance more transparent, accountable, and participatory. The journey is challenging, but the outcomes can reshape India’s socio-economic landscape.

500 Words Essay on Digital India

Digital india: a vision of empowerment.

Digital India is a revolutionary initiative launched by the Government of India to ensure that government services are available to citizens electronically. It aims to bridge the digital divide and bring about comprehensive digital inclusion.

Objective and Strategy

The primary objective of Digital India is to create a digitally empowered society and knowledge economy. It aims to provide digital infrastructure as a utility to every citizen, governance and services on demand, and digital empowerment of citizens.

The strategy to achieve this vision is twofold. Firstly, it involves creating a robust digital infrastructure that can support the delivery of a multitude of services. Secondly, it involves digitally empowering citizens by enhancing digital literacy, digital resources, and institutional training.

Impact on Society and Economy

Digital India has profound implications for society and the economy. It promotes inclusive growth by ensuring that people from all walks of life have access to government services. It facilitates job creation by promoting digital literacy and encouraging the growth of digital industries.

Moreover, it fosters transparency and accountability in governance, which is a significant step towards eradicating corruption. It also enhances the ease of doing business by simplifying procedures and making services available online.

Challenges and Opportunities

Despite the promising prospects, Digital India faces several challenges. These include inadequate digital infrastructure in rural areas, a lack of digital literacy among the populace, and data security concerns. However, these challenges also present opportunities for growth and development.

For instance, improving digital infrastructure in rural areas can lead to broader economic development. Enhancing digital literacy can empower citizens and open up new job opportunities. Addressing data security concerns can lead to the development of robust cybersecurity infrastructure, which is crucial in today’s digital age.

Future Prospects

The future of Digital India looks promising. With the increasing penetration of the internet and smartphones, the reach of Digital India is set to expand further. The focus on digital literacy and digital skills is likely to create a digitally empowered workforce, which can significantly boost the economy.

Moreover, the push for digital payments and e-commerce under Digital India can transform the economic landscape by promoting cashless transactions and boosting online trade.

Digital India is a visionary initiative that holds the potential to transform India into a digitally empowered society and knowledge economy. While it faces challenges, the opportunities it presents are immense. By leveraging these opportunities and overcoming the challenges, Digital India can play a pivotal role in shaping India’s future.

That’s it! I hope the essay helped you.

If you’re looking for more, here are essays on other interesting topics:

• Essay on Development of India after Independence
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Trump Media Merger Provides Trump a Potential Cash Lifeline

Having closed the merger of his social media company, Mr. Trump could find ways to raise cash against the value of his stake in the company, estimated at more than $3 billion.

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By Matthew Goldstein

Former President Donald J. Trump’s social media company — and the parent of his favorite communications platform, Truth Social — became a public company on Friday through a merger that will raise Mr. Trump’s wealth by billions of dollars and potentially help pay his mounting legal bills.

Trump Media & Technology Group is poised to debut on Wall Street at a market value of around $5 billion — based on the $37 share price of its merger partner, Digital World Acquisition Corp. Given that Mr. Trump owns more than 60 percent of the company, his overall net worth will increase by $3 billion — instantly doubling his wealth from the $2.6 billion estimate by Forbes magazine in October.

So far, those gains are on paper, and Mr. Trump is unlikely to be able to quickly turn it into cash because of restrictions in the merger agreement that prevent major shareholders from selling shares for at least six months, or using them as collateral for loans. But because Mr. Trump controls so much of Trump Media, and because his allies are expected to make up a majority of the new board, they could waive those restrictions on his request.

The question of where Mr. Trump can raise cash has become an urgent one because he is on the hook for hundreds of millions of dollars of legal bills tied to the multiple cases against him. Mr. Trump is facing a Monday deadline to cover a $454 million penalty in a civil fraud case brought by the New York State attorney general, which accuses him of greatly inflating the value of his real estate holdings in deals with banks.

If Mr. Trump cannot come up with the cash or a bond to cover the penalty while he appeals the ruling, the attorney general’s office could seize some of his properties.

Trump Media’s board might be reluctant to allow Mr. Trump to sell shares early as that would likely deflate the company’s share price. But lifting the restriction on using shares as collateral would help him secure a bond and minimize the negative impact on the stock price.

Before the merger closed, Mr. Trump was chairman of Trump Media but neither it nor Digital World disclosed whether he will continue to retain the title. Either way, Mr. Trump will hold enormous sway over the company as the company’s new seven-member board includes Mr. Trump’s eldest son, Donald Trump Jr., and three former members of his administration. His 79 million shares give him a large majority stake in the company and his brand is critical to the success of Truth Social, which has become his main megaphone with communicating to his supporters.

There is no guarantee that the stock of Trump Media will continue to trade at its current levels. If the share price falls over the coming months, the sizable increase to his net worth could be smaller over time. Digital World’s shares dropped about 14 percent after the shareholder vote approving the merger.

As part of the merger, investors in Digital World — the cash-rich shell company that voted to merge with Trump Media — will now become shareholders of Mr. Trump’s three-year-old company. The deal will transfer more than $300 million from Digital World’s coffers to Trump Media, a struggling business with little revenue, and allow Truth Social to keep operating.

Shares of Trump Media could begin trading on the stock market as early as Monday under the stock symbol DJT.

Many of Digital World’s 400,000 shareholders are ordinary investors and fans of Mr. Trump, whose enthusiasm about the former president has propped up the shares for years. But it remains to be seen whether they will hold on to the stock now that the merger is done.

In a statement before the vote, Trump Media said that “the merger will enable Truth Social to enhance and expand our platform.”

With the future of his real estate business in flux because of the ruling in the New York civil fraud case, Trump Media could become one of Mr. Trump’s main moneymakers — and a potential source of conflict should he win the presidency in November. Trump Media currently gets most of its revenue from Truth Social, its flagship platform where several upstart companies advertise their products, targeting Mr. Trump’s supporters and using slogans that are variations on America First or Make America Great Again.

In using the stock symbol DJT, Trump Media is taking a trip back in time. One of Mr. Trump’s former publicly traded companies, Trump Hotels and Casino Resorts, had traded under that stock symbol until it filed for bankruptcy in 2004.

The merger of Digital World and Trump Media, first proposed in October 2021, is one of the more prominent deals to emerge from a strategy that many companies used to go public that was all the rage during the pandemic. Special purpose acquisition companies like Digital World are speculative investment vehicles set up for the purpose of raising money in an initial public offering and then finding an operating business to buy.

In going public through a SPAC merger, Trump Media is following other so-called alt-right businesses like Rumble, an online video streaming service that caters to right-leaning media personalities, and PublicSquare, which bills itself as an online marketplace for the “patriotic parallel economy.”

Trump Media took in just $3.3 million in advertising revenue on Truth Social during the first nine months of last year, and the company, during that period, incurred a net loss of $49 million.

“It’s unclear to me what is the strategy to building out the platform especially so it may reach a broader advertiser,” said Shannon McGregor, a professor of journalism and media at the University of North Carolina. “There does seem to be a ceiling in these niche markets.”

The merger was almost derailed by a Securities and Exchange Commission investigation into deal talks between the two companies that took place before Digital World’s initial public offering. Securities rules prohibit SPACs from engaging in meaningful merger talks before going public.

But the deal got back on track after Digital World settled with the S.E.C. in July, agreeing to pay an $18 million penalty after the merger was completed and to revise its corporate filings.

After the deal was done on Friday, many shareholders and Trump fans celebrated online. Chad Nedohin, a vocal proponent of the merger on Truth Social, posted a livestream of the shareholder meeting on Rumble. In a chat room, viewers shared their enthusiasm for the deal, with messages such as “Great day to be alive” and “The day is finally here.”

Matthew Goldstein covers Wall Street and white-collar crime and housing issues. More about Matthew Goldstein