Digital Payments Highway: The Indian Perspective

Executive Summary

With so much going on in the Indian economy driven by initiatives through multiple stakeholders (growing day-by-day), this is a humble attempt to reflect my thoughts on what the future of payments could be in the days ahead and help stakeholders formulate strategies based on the same. The inference is based on primary and secondary data that I had purview to and I leave it to your judgment to receive what is plausible.

A Peep Into India's Consumer Demographics

The table below helps draw a conclusion that India will be the most populous country with a high population density in urban centers. India will remain a net emigrant country over the next few decades. Urbanization will grow from 33% in 2015 to 52% by 2050.

Source: Worldometers

As per a McKinsey study way back in 2010, the urbanization will be driven by existing cities and new cities being created. Few states are expected to achieve the status of 50% urbanization by 2030, with at least 13 cities expected to have a population of 4 million plus. The GDP of some of the states will mirror that of other countries. This is being used as a reference here since it has relevance to the smart city initiative by the current government.

India is also expected to benefit from a demographic dividend for years to come. The working-age population, aged 15-64, will rise by 125 million over the next decade, and another 103 million over the following decade.

Not only does India have a lot of young people (33% of the population is younger than 15 and 50% younger than 24), but also they are becoming increasingly educated. By 2020, India is projected to account for 12% of higher education graduates globally—more than the US and only behind China[i]. One of the other critical factors to be considered is the average increase in life expectancy over the years, representing a higher percentage of aging population to be supported over the years.

Moving Towards a Digital Economy

Let’s start with where we are today. India, a highly cash-dominant economy, is faced with the following challenges:

  1. Very high percentage of cash use for payments
  2. Quality of notes
  3. High cost of cash driven by issuance, re-issuance (especially low-value notes) and currency circulation
  4. Cost of fraud and prevention (counterfeit in circulation, adding security features on genuine notes and replacing them)
  5. Infrastructure to support a digitally inclusive society (financial literacy/transactions through digital channels)
  6. The unstated—the parallel economy

Source: Times of India

Where Are We on the Digital Payment Highway?

*Source: RBI Data May 2015 (It might be advisable to look at credit and debit card data separately)

Digital Financial Inclusion: The Way Forward

Given the challenges around cash, the move towards a digital economy requires participation and support from the existing and emerging key stakeholders:

The key stakeholders have to innovate and collaborate to create an inclusive strategy keeping consumer convenience and affordability in mind. My definition of a consumer could range from individual retail customer to corporate customers.

The table below briefly discuss the various roles each stakeholder can play to enhance the journey towards a digital payments world.


India, the elephant ready to dance, is bubbling with economic activities across the spectrum of the society. As we move forward by creating inclusive payment solutions for the country, it would be good to remember the following themes in the overall design:

  1. Interoperability between different payment options
  2. Privacy in the hands of the consumer (sharing of data based on consent)
  3. Making a payment is equivalent to decision-making. Create the ability to offer credible advice for decision-making based on data analysis and offer multiple payment choices to the consumer.
  4. Ability to process big data from the Internet of Things and utilize the same for adding customer value and service availability.
  5. Create the right balance between security and convenience across payment options.
  6. Offer a ubiquitous payment experience across the consumer and merchant base (minimize the behavioral changes between various payment methods).
  7. Add value to merchant community through acceptance of electronic payments (ex: offer simpler reconciliation & settlement and inventory management)
  8. Create the right product for the right segment (position) at the right price. The payment choice could be influenced by the age, digital financial literacy and income levels of the consumer.
  9. Time the roll out of innovation according to a key external factor: availability of robust nationwide infrastructure.
  10. Solutions that keeps in mind the unprecedented influx of users into the digital payment scheme driven by higher income levels across segments should stand the test of time.

As payments become seamless and almost invisible, let the simpler and secure innovative payment solutions made for India emerge from the most populous nation in the world in decades to come and pave the way for establishing new international standards. Payment solutions from India could lead the way for the world, and we all have an opportunity to contribute in creating this future. As the future emerges, I hope to use my own digital wallet and choice of payment modes rather than using third-party wallets to spend my money. My wallet, my data, my risk appetite and hence, my budgeting; long-term financial planning is what consumers would be excited about.

[i] Extract from

[ii] Locations where withdrawals are supplemented by customer deposits reducing the cash replenishment need from the bank.