Digitalization of payments: A much required transformation

Author : Divyanshu Sharma

Digitalization of payments refers to using a virtual transaction space over the internet to transfer money from source account to the beneficiary account number. It started with e- banking in 2000s which was limited to big business transactions. With the launch of digital India programmer in 2015, the number and type of digital payment methods has increased multi folds. Right from internet banking offered by organised banking sector to money transfer and bill payment applications like Paytm, Google Pay, Phonepe, etc., today digital transfer has become integral to any sector of Indian economy. The transition from cash based payment to digitization has been rapid owing to the increase in the number of smart phone users in the country coupled with robust internet connectivity.

Digitalization helps to achieve hassle free payments with minimum inconvenience where we don’t have to rush to the service providers before the deadlines. We don’t have to think about the risk involved in carrying cash. In the post Covid-19 era, which requires minimum public dealing and maximum social distancing, digitalization is the key to achieve the ends. It reduces corruption and pilferage in the distribution of payments of social benefit programmed by direct benefit transfer (DBT). The e-commerce has gained momentum with digitization of payments which is a boost to the economy. India has the currency to GDP ratio of 11.25%. Decreasing the amount of currency under circulation by encouraging electronic payment reduces the cost of printing currency, which was about Rs 80 billion in a financial year.

Digitalization is the reality of future transactions. It is easier for the city dwellers to mound their lives to this fact. However, the government is required to make efforts to increase digital literacy rate among the young and elderly in rural and remote areas where people still find cash to be a more secure option. Several reforms like incentives on online payments and introduction of digital currency are way forward in this direction. By solving the few challenges in the way, the government of India can achieve the target of reducing corruption and more inclusive growth by digitization of payments.

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