Apart from e-commerce, the rising popularity of NBFCs has also increased the scope of digital payments in the country.
While Modi govt’s flagship campaign – Digital India – has received an encouraging response from all over the country, the emergence of e-commerce and a series of bank consolidations may act as catalysts to further expand the digital payment volume. With the increasing dependence of e-commerce, the volume of such payments will likely increase as more customers will tend to pay online. Digital POS used for online purchases may also impact the Cash-on-Delivery model and replace it with digital transactions. Apart from e-commerce, the rising popularity of NBFCs has also increased the scope of digital payments in the country. The quantum of opportunity can be gauged by the fact that nearly 10 per cent of the UPI transactions in FY19 were accounted for by banks and the rest were initiated by consumer-facing fintech apps.
“With the advent of these mega banking entities, the rise in dominance of NBFCs among retail and small business credit, the explosion of digital payment methods led by UPI, and the pressure to continuously optimize operations, Indian banks would need to significantly invest in building digital capabilities to sustain and develop core differentiators,” said Kaushik Roy, VP – South Asia, ACI Worldwide.
The year 2020 will see an explosion of the digital POS ecosystem in the country, especially among the MSME segment, however, to pave way for growth in 2020, Indian banks would need to optimize and upgrade their core technologies to adopt the concepts of open banking, Kaushik Roy added.
Surprisingly, digital payments in India seem to grow at a CAGR of 12.7 per cent and may jump to Rs 4,055 lakh crore in FY24 with a five-year CAGR of 20 per cent, says a CRISIL Research.
“We expect 200 million users from emerging India to shift to digital payments in 2020. To sustain the shift, we should build, on top of UPI, a platform that provides small personal loans, easy mutual funds, and low-cost insurance products. This will ensure meaningful financial inclusion,” Varun Sridhar, Lead – Realme Pay Sa, told Financial Express Online.
All payment participants & the regulator should launch a joint education campaign, as was done by the mutual fund industry, Varun Sridhar added.
Meanwhile, considering the dynamic nature of information technology, breaches related to cybersecurity have also shot up with the increasing volume of digital banking. Cyber threat incidents including phishing, network scanning and probing, viruses and website hacking, were around 50,000 in 2016, which has skyrocketed to over 3 lakh in the first ten months of 2019. In a reply to a question in Lok Sabha, Sanjay Dhotre, MoS, Ministry of Electronics and Information Technology earlier said that owners should protect networks by way of hardening and deploying appropriate security controls to fight cyber threats.