Digital Payment System: A Feat Forward of India Mrunal Chetanbhai Joshi, Research Scholar, Gujarat Technological University, Ahmedabad

Abstract Digital India campaign launched on 2nd July 2015 by our Honorable Prime Minister Shri Narendra Modi. The stated role of Digital India is “Faceless, Paperless, Cashless”. To support Cashless as a part of Digital India Campaign government has initiated with different modes of digital payment system. As part of digital payment system few old and few new modes were promoted to develop cashless economy, which are the need of today for developing country like India. This paper is an attempt to study the trend in various modes of digital payments like NFS Inter Bank ATM Cash Withdrawal, NACH, CTS, IMPS, AEPS, BBPS, UPI, BHIM(UPI) and NETC in last three years. In this study it is found that in previous two years (2015-16 and 2016-17) and especially during the year 2017-18 (up to July 2017) there is remarkable growth in digital payment in volume and value both. Key Word: Digital Payment System, Demonetisation, NACH, IMPS, ARPS, BBPS, UPI, BHIM, NETC

Introduction As a part of Digital India movement, government of India also emphasised on digital payment system. To give boost and better settlement of digital payment system government initiated number of new modes of digital payment under National Payments Corporation of India (NPCI). It is an umbrella organization for all retail payments system in India. NPCI was set up with the guidance and support of the Reserve Bank of India (RBI) and Indian Banks’ Association (IBA) in December 2008 and the Certificate of Commencement of Business was issued in April 2009. It was aimed to operate for the benefit of all the member banks and their customers. NPCI has ten promoter banks namely, State Bank of India, Punjab National Bank, Canara Bank, Bank of Baroda, Union Bank of India, Bank of India, ICICI Bank, HDFC Bank, Citibank and HSBC. Board for Regulation and Supervision of Payment and Settlement Systems (BPSS) at its meeting held on September 24, 2009 had given an in-principle approval to issue authoriza tio n to NPCI for operating various retail payment systems in the country and granted Certificate of Authorization for operation of National Financial Switch (NFS) ATM Network with effect from October 15, 2009 and it taken over NFS operations on December 14, 2009. Membership regulations and rules had been framed for enrolling all banks in the country as members. This

was done so that when the nation-wide payment systems are launched, all would get included on a standardized platform. NPCI took various initiatives to improve digital payment systems. In this regard it launched various product and services. Such products are services are Bharat Interface for Money (BHIM), Unified Payment Interface (UPI), Immediate Payment Serives (IMPS), National Autometed Clearing House (NACH), Cheque Trucation System (CTS), Aadhar Enabled Payment System (AEPS), RuPay, Bharat Bill Payment System (BBPS), Bharat QR (BQR) and National Electronic Toll Collection (NETC). 

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NACH has implemented for Banks, Financial Institutions, Corporates and Government a web based solution to facilitate interbank, high volume, electronic transactions which are repetitive and periodic in nature. It can be used for making bulk transactions towards distribution of subsidies, dividends, interest, salary, pension etc. and also for bulk transactions towards collection of payments pertaining to telephone, electricity, water, loans, investments in mutual funds, insurance premium etc. In CTS an electronic image of the cheque is transmitted to the paying branch through the clearing house, along with relevant information like data on the MICR band, date of presentation, presenting bank, etc. Cheque truncation thus obviates the need to move the physical instruments across bank branches, other than in exceptional circumstances for clearing purposes. IMPS offers an instant, 24X7, interbank electronic fund transfer service through mobile phones. IMPS is an emphatic tool to transfer money instantly within banks across India through mobile, internet and ATM which is not only safe but also economical both in financial and non-financial perspectives. RuPay is a new card payment scheme that has been conceived to fulfill RBI’s vision to offer a domestic, open-loop, multilateral system which will allow all Indian banks and financial institutions in India to participate in electronic payments. AEPS is a bank led model which allows online interoperable financial inclusion transaction at PoS (MicroATM) through the Business correspondent of any bank using the Aadhaar authentication. BBPS is a one-stop payment platform for all bills providing an interoperable and accessible “Anytime Anywhere” bill payment service to all customers across India with certainty, reliability and safety of transactions. The payment modes options facilitated under BBPS are Cards (Credit, Debit and Prepaid), Account transfer, IMPS, Internet Banking, UPI, Wallets, AEPS and Cash. It also provides instant confirmation of payment via an SMS or receipt. UPI is a system that powers multiple bank accounts into a single mobile application (of any participating bank), merging several banking features, seamless fund routing & merchant payments into one hood. It also caters to the “Peer to Peer” collect request which can be scheduled and paid as per requirement and convenience. o BHIM is an app that lets you make simple, easy and quick payment transactions using Unified Payments Interface (UPI). You can make instant bank-to-bank payments and Pay and collect money using just Mobile number or Virtual Payment Address (VPA). o *99# service works on Unstructured Supplementary Service Data (USSD) channel. launched by the Honorable Prime Minister of India Shri Narendra Modi on 28th August 2014 as part of Pradhan Mantri Jan Dhan Yojana (PMJDY). Banking customers can avail this service by dialing *99# and transact through an interactive menu displayed on the mobile screen. Key services offered under this service include, interbank account to account fund transfer, balance enquiry, mini statement besides host of other services.

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BQR is Person to Merchant (P2M) Mobile payment solution. Merchants need to display QR codes in their premises. User can scan these QR via BQR enabled mobile banking app and pay using Card linked account / VPA / IFSC + Account / Aadhaar. NETC is national wide cashless payments of toll fee with nationwide inter-operable network

Thus, all these product and services are great initiatives of government towards development of digital payment system in India. Following literature study help me in better understanding of current state of annotations in digital payment system in India.

Literature Review Mishra (2017) in her study found that Government is decided to set digital targets for banks and payment firms. The government has taken a holistic approach to digital banking, looking at ways to incentivize train merchants and customers who use digital platforms, food and civil supply with the five lakh ration shops. Government is also planning to educate people well about digital payments. The process of demonetization was not properly planned. Planning for making India truly digital has begun only post demonetization. Bhakta (2017) noted that digital payments grew 57% year-on-year in the last fiscal with mobile wallets more than doubling and card payments rising 44%, helped by a strong government push particularly after the demonetisation. He had also reported Aadhaar-enabled payment systems and the government-backed, Unified Payments Interface (UPI), have crossed transaction of 8.8 billion. In his article he has also covered details found in interview with AP Hota, MD, NPCI. He reported that hope in increasing in UPI as use of RuPay card is increasing will help to achieve target of 25 billion transactions. 1 lakh BharatQR codes that have been distributed across merchant outlets this year and they have plan to do another additional 93,000 the coming year. RuPay cards had 195 million transactions at PoS terminals and around 87.5 millio n transactions for online transactions. Bhakta and Variyar (2017) reported that The Ratan Watal committee recommend proper measures for encouraging digital payment in India, may have envisaged a rosy picture for digital transactions and recommended sweeping changes to regulation around payments. But industry executives and experts felt that the report was extremely futuristic and almost verges on wishful thinking as several recommendations are likely to face implementation issues. Agarwal and Variyar (2017) reported in their article that in Budget our finance minister Arun Jaitley encouraged digital payments and announced a mission targeting at least 2,500 crore cashless transactions in 2017-18 through payment modules such as the government’s Unified Payments Interface (UPI) and Aadhaar Pay. The biometrics-based payments system will be launched shortly, for which banks will be encouraged to roll out 2 million Aadhaar-linked payments terminals by September. He also put a proposal to mandate all government receipts through digital means beyond a limit is also under consideration. Variyar (2017) reported issues of digital payment did not consider in Budget 2017. Such issues were: costs of incentivising digital payments should be borne by government and RBI and not customers or financial intermediaries. Other issue was interoperability and open access to payment systems by non-bank payment service providers emphasised by Ratan Watal Committee. She also reported reported an issue related to role of NPCI.

Goriparthi and Tiwari (2017) have found demonetisation as positive step ahead to dream of Digital India. They also argued policy direction by the government highlights the tremendous growth possibilities for the digital payments sector that is only just started to establish itself. They also emphasised that demonetization has also in a way dismantled some of the traditio na l barriers preventing Indians from adopting digital payment solutions such as the habit of using cash, complexity and unfamiliarity of digital payment systems, lack of compelling value proposition, and anxiety over fraud and network security. Ravi (2017) in his study found great scope of digital payment in rural India as it is faster and cheaper. He also argued that NPCI had developed new payment application, which are designed to work on all phones with or without internet and even without phones is helping rural India. He also emphasised on advantages of new digital payment system like: reduction in transaction cost, development of IT act in support of digital payment system, scope for development of ICT in India and ease in day settlement for merchants and small retailers. Kumari and Khanna (2017) mentioned that cashless economy initiative will be of significa nt benefits to developing economy; hence the cashless system will be helpful in the fight against corruption and money laundering. One most significant contribution of the cashless economy is that it is expected to reduce the risk associated with carrying cash like loss of cash, theft and armed robbery, which will drastically reduce. They have also put an argument about positive relationship between cashless and economic growth. Introduction and above literature made me enable to form following objective for the study.

Objectives   

To study a trend in digital payment through various modes To study the performance of newfangled digital payment modes To compare new modes of digital payment system with older ones

Research Methodology In this study descriptive design is used. For this study secondary data published by governme nt is used. Required data is collected from websites like www.npci.org.in and www.rbi.org. in. Scope of this study is limited for the period from the year 2014-15 to July 2017. In analysis of data simple data analysis tools like cross tabulation, trend percentage analysis, line chart and bar chart are used.

Facts and Figure Following table shows retail digital payment done on NPCI platform during last three years. In terms of volume (in million) and value (in billion) of those transactions in rupees. Table 1: Total Retail Payment on NPCI Platform Volume (in Mn) Value (in Bn)

F.Y-2014-15 3,709.46 76,111.29

F.Y-2015-16 5,406.41 85,271.12

F.Y-2016-17 7,138.42 96,626.07

Figure 1: Trend Percentage of Total Retail Payment on NPCI Platform

192.44

Volume (in Mn)

Value (in Bn)

145.75

126.95

112.03 100.00 100.00

F.Y-2014-15

F.Y-2015-16

F.Y-2016-17

Figure 1 shows trend percentage of retail payment in volume and values of absolute data from Table 1. From the trend line we can observe that volume in retail digital transaction has CAGR of about 45% while CAGR in value of digital transaction is about 12%. It means that number of transactions has more growth than in terms of their values. Table 2: Retail Payment on NPCI Platform with various mode Sr. No.

NPCI Operated Systems Financial Txns:

1 2 3 4

NFS Inter Bank ATM Cash Withdrawal NACH- National Automated Clearing House CTS Cheque Clearing (Processed Volume) IMPS

F.Y-2014-15

F.Y-2015-16

F.Y-2016-17

Volume (in Mn)

Value (in Bn)

Volume (in Mn)

Value (in Bn)

Volume (in Mn)

Value (in Bn)

2,374.30

8,311.67

2,837.01

9,993.22

3,170.18

10,818.39

324.63

1,196.97

1,392.79

3,715.09

1,968.03

7,207.84

926.00

66,009.50

919.80

69,889.15

1,111.86

74,035.22

78.44

581.89

220.81

1,622.29

506.84

4,116.24

(Source: RBI Data) Table 2 shows major mode of retail digital payment on NPCI platform. We can observe that NFS Inter Bank ATM Cash withdrawals have maximum number of transactions in terms of volume and in terms of values all three years. Second highest mode of retail digital payment is NACH. CT and IMPS are least in FY 2014-15 but growth in both are highest among all four modes. In last year i.e. 2016-17 CTS has highest number in terms of value of transaction done. To make picture more clear to understand about growth in various forms of digital payment trend percentage method is more useful than simple tabulated data. Following figure presents growth in terms of trend percentage.

Figure 2: Trend Percentage Analysis of Retail Payment (in rupees) on NPCI Platform

IMPS CTS Cheque Clearing ( Processed Volume) NACH- National Automated Clearing House NFS Inter Bank ATM Cash Withdrawal

IMPS , 707.39

CTS, 112.16 IMPS , 278.80 CTS,105.88 IMPS , 100 CTS, 100 NACH, 100 ATM, 100

NACH, 602.18

NACH, 310.38 ATM, 120.23

ATM, 130.16

2015-16

2016-17

2014-15

Figure 2 shows that in last three years, traditional fund transfer system like ATM Cash withdrawal and in Cheque Clearing (CTS) grown at normal rate. But growth of NACH and IMPS as new mode of digital payment shoot up at very high rate. CAGR of IMPS and NACH from 2014-15 to 2016-17 they are 253.7% and 201% respectively. It shows highly acceptability of new digital payment system due to various reasons like speed, security and convenient way of fund transfer. Following figures shows performance of them during the year of 2016-17. Figure 3: Retail Payment (volume in million) on NPCI Platform in year 2017-2018 100

95 90

280

97.08

95.26 270.31

275.06 91.85

265.19

270

268.50

92.20

CTS Cheque Clearing ( Processed Volume) 85

260

250

IMPS

240

80

NFS Inter Bank ATM Cash Withdrawal

75

NACH- National Automated Clearing House

230 220 70 65

212.63 65.08

69.07

… 65.84 194.26

210

204.28 200

196.92

60

190

Apr-17

May-17

Jun-17

Jul-17

Looking at figure number 2 we can say that in NPCI all types of retail payment are increasing by time. But this figure focuses on number of transactions in terms of volume, focus on volume of retail payment in term rupees may make picture more clear about increase in various digita l payment modes. Figure 4: Retail Payment (in rupees in billion) on NPCI Platform in year 2017-2018 6,990.65

1,100

7,000

1,022.59

1,071.15

1,073.50

1,000

6,800

905.15

900

6,900

1,062.34

6,745.89

6,700 771.99

800

730.73

6,600

700 6,500

691.82

6,409.95

604.76

600

6,400

585.59

596.55

562.06

6,342.50 Jul-17

500 Apr-17

May-17

Jun-17

6,300

NFS Inter Bank ATM Cash Withdrawal

NACH- National Automated Clearing House

IMPS

CTS Cheque Clearing ( Processed Volume)

In last five month of current year we can observe that even monthly data (Figure 4) advocates growth in new digital payment system of NACH and IMPS. While at the same time in traditional system of ATM withdrawal and Cheque Clearing system there is downward trend, especially in cash of Cheque Clearing there is drastic down fall in amount of rupees of payments. This downfall in ATM withdrawal and in Cheque Clearing System may be due to introduction of new mode of digital payments like AEPS (Inter Bank) Txn over Micro ATM (e.g. Cash withdrawal/ Cash Deposit), BBPS (Bill Fetch & Bill Payment), UPI - Unified Payments Interface, USSD 1.0 and NETC. Table 3: Newfangled mode of retail digital payments (Value in Billion) after demonetisation NPCI Operated Systems AEPS

Dec'16

Jan'17

Feb'17

Mar'17 Apr'17

May'17 Jun'17

Jul'17

2.07

3.16

3.92

5.64

7.93

11.69

13.12

14.09

0.0004

0.004

0.01

0.02

0.03

0.06

0.15

0.26

7.02

16.96

19.38

24.25

22.71

27.97

30.98

34.11

0.02

3.56

6.23

8.23

10.02

13.07

14.87

16.00

0.02

0.37

0.36

0.34

0.30

0.32

0.31

0.30

BBPS UPI BHIM(UPI) USSD (UPI)

2.0

UPI excluding BHIM & USSD(UPI) NETC

6.98

13.02

12.79

15.68

12.39

14.59

0.88

1.79

1.84

2.09

2.11

2.25

15.80

17.81

2.26

2.34

(Source: RBI Data) Figure 5: Newfangled mode of retail digital payments (Value in Billion) 40.0 AEPS

UPI

BHIM(UPI)

35.0

BBPS 30.0

1.79

24.25

20.0 15.0

0.88

12.39

12.79 8.23

7.02

6.23

6.98

0.37 3.56 3.16

5.0 2.07 0.02 0.0 0.0004

0.01

0.004

0.02

Dec'16

0.36 3.92

Jan'17

Feb'17

2.0

1.5

14.59

15.68

13.02

34.11

22.71

19.38 16.96

10.0

30.98

27.97

1.84

25.0

2.5

2.34

2.26

UPI excluding BHIM & USSD(UPI) 2.11 USSD 2.0 (UPI)

2.09

NETC

2.25

10.02

13.07 11.69

0.34

7.93

5.64

0.30

0.32

0.03

0.06

0.02

Mar'17

Apr'17

15.80 14.87 13.12

17.81 16.00

0.30

May'17

1.0

14.09 0.5

0.31

0.15

0.26

0.0

Jun'17

Jul'17

Table 3 and Figure 5 presents the data after demonetisation action in November 2016. It demonstrates data of newfangled modes of digital payment in terms of values in billion. In period of last 8 months from demonetisation we can observe that in all mode of digital payment has upward trends. Table 4: Newfangled mode of retail digital payments (Volume in Million) after demonetisation NPCI Systems AEPS

Operated Dec'16 Jan'17 Feb'17 Mar'17 Apr'17 May'17 Jun'17 Jul'17 1.97

2.65

3.28

5.04

6.13

6.86

6.62

6.89

0.001

0.008

0.02

0.03

0.04

0.10

0.17

0.36

1.99

4.46

4.38

6.37

7.20

9.36

10.35

11.63

0.04

1.72

1.97

2.46

3.19

3.98

4.62

5.43

0.03

0.31

0.22

0.21

0.19

0.19

0.20

0.19

1.92

2.44

2.19

3.70

3.82

5.19

5.54

6.01

3.19

6.28

6.55

7.50

7.41

8.07

8.21

8.64

BBPS UPI BHIM(UPI) USSD 2.0 (UPI) UPI excluding BHIM & USSD(UPI) NETC

(Source: RBI Data)

Figure 6: Newfangled mode of retail digital payments (Volume in Million) 12.0

AEPS

10.35 UPI excluding BHIM & USSD(UPI)

BHIM(UPI) 0.31 NETC

10.0

BBPS

7.41 0.22

6.0

6.28

6.55

4.46

3.19

2.44 2.65

1.92 2.0

1.99

1.97

1.72

0.03 0.0

0.04 0.001 Dec'16

0.008

Jan'17

8.07 7.20

6.37

6.13

5.04 4.0

9.36

7.50 0.21

0.19

4.38 3.70 3.28

2.19 1.97 0.02

3.82 3.19

6.86

0.19 5.19

0.40

0.36 0.35

8.64

USSD 2.0 (UPI)

8.0

11.63

UPI

0.30

8.21

6.62 0.20 5.54 0.17 4.62

0.25 6.89 6.01 0.20 0.19 5.43 0.15

3.98 0.10

0.10

2.46 0.03

0.05

0.04

0.00

Feb'17

Mar'17

Apr'17

May'17

Jun'17

Jul'17

Table 4 and Figure 6 shows growth in volume in millions in newfangled modes of digita l payments under NPCI. They show there is high growth in all modes except USSD 2.0 (UPI). Thus there is remarkable growth in both in terms of volume and value in digital payments in different innovated modes after demonetisation action of government.

Conclusion Current government took enhanced initiatives to develop digital payment system in India. There is remarkable growth found in digital payments in last three years. People are proactively adopting new modes of digital payments and also hoist the usage of new digital payment modes over old digital payment modes. Demonetisation also amplified in digital payment transactions especially in newfangled modes of digital payments like NACH, IMPS, AEPS, BBPS, UPI, BHIM(UPI) and NETC. Looking towards government action and target based implementations; it ensures that it will certainly facilitate development of economy at higher growth rate in future.

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http://tech.economictimes.indiatimes.com/news/internet/digital-economy-to-offer-57-million-job-opportunities-ravi-shankar-prasad/60706925 Cashless India. Retrieved September 15, 2017, from http://cashlessindia.gov.in/digital_payment_methods.html files/92/digital_payment_methods.html Goriparthi, R. K., & Tiwari, P. (2017). Demonetization in India an Era for Digital Payments. Splint International Journal of Professionals, 4(1), 40. Kumari, N., & Khanna, J. (2017). Cashless Payment: A Behaviourial Change To Economic Growth. International Journal Of Scientific Research And Education, 5(07). Mishra, N. (2017). READINESS FOR PARADIGM SHIFT. International Journal of Public Finance, Law & Taxation, 2(1), 25-28. National Payments Corporation of India. Retrieved September 16, 2015, from http://www.npci.org.in/stats.aspx files/95/stats.html Ravi, C. (2017). Digital payments system and rural India: A review of transaction to cashless economy. Reserve Bank of India. (November 30, 2016). Retrieved September 15, 2017, from https://www.rbi.org.in/commonman/english/scripts/FAQs.aspx?Id=273 Variyar, M. (2017). What Budget 2017 did not have for digital payments - ETtech. ETtech.com. Retrieved September 2017, 2017, from http://tech.economictimes.indiatimes.com/news/internet/what-budget-2017-did- nothave-for-digital-payments/56917077