The document discusses India's transition to a cashless economy and the impact of digital payments. Key points include: - Government initiatives like Jan Dhan Yojana, Aadhar, and UPI have increased financial inclusion and digital payments. Usage has grown significantly in recent years. - This presents opportunities for value-added services, fintech companies, and job growth. However, challenges remain around connectivity, financial literacy, and preventing cybercrime. - Emerging trends include contactless payments, augmented reality shopping, and distributed ledger technologies like blockchain disrupting payments. Regulators are focusing on data privacy compliance.

1. Cashless
Economy
Its Impact on India
Dr. Saurabh Agarwal
Professor, Indian Institute of
Finance, Greater Noida

2. Objective
 To weed out black money and corruption
 Financial Inclusion
 To improve tax collection – Recent Headlines
- Crorepati taxpayers rise by 68 per cent,
direct tax collection increases by 15.7 per
cent: CBDT (October 23rd, 2018)

3. What constitutes Digital

4. Recent Innovations
 Cash Subsidy Transfers; Jan Dhan Yojana;
Mobile/Aadhar based banking enabled Financial
Inclusion to Common Man
 Major Innovations in Digital Payments
 Mobile Money Systems
 Bharat Interface for Money (BHIM)
 Unified Payment Interface
 *99#
 Issued RuPay Cards
 Aadhar Enabled Payment System
 Bharat Bill Payment System
 Credit and Local Currencies are alternative units of
account
 Digital Currencies

5. Is it growing?
 Volume has grown 55.1% in 2016-17 and in
terms of Value growth is 24.2% in 2016-17
compared to 2015-16
 In volume and value terms the growth during
the year 2017-18 was much higher than the
trend growth rate during the last five years
(2011-16)

6. Spectacular Growth
 The UPI and IMPS Segment
 Unified Payments Interface (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.Immediate Payment Service (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.

7. Opportunities
 Value-added services
 FinTechs
 With Paytm—which has 7 million merchants
(>2x the banking system)—now becoming a
bank and post the launch of Google Tez and
PhonePe, which are also focusing on
merchant payments, a steep rise in digital
payments could be expected.

8. Opportunities
 While the number of PoS terminals has doubled
since demonetization, the merchant acquisition
infrastructure in India remains weak, as banks
have not been able to drive adoption.
 The digital payments market In India is expected
to grow to US $ 1 trillion by 2023 led by growth in
mobile payments, presenting huge business
opportunities for players in the digital space.

9. Opportunities
 Mobile payments are slated to rise from $ 10
billion in 2017-18 to $ 190 billion by 2023.
 Promise growth
 More jobs and Services
 Make business more productive
 Help Government deliver public services efficiently
– Direct Benefit Transfer (DBT)
 Improve poor record of government initiatives

10. Challenges
 More than 2 billion people have no access to any
financial services today
 About 59% Men and 50% women in developing
countries have an account with a regulated financial
institution
 60% of the World Population is still Offline
 7.4 Billion total Population has access to information
and communication Technologies
 1.1 billion have access to high speed internet
 3.2 billion total Internet Users
 5.2 Billion mobile phone users
 7 Billion within the coverage of mobile phones

11. Challenges
 Need for Better Connectivity
 Safe Internet
 Digital divides of age, gender, income, education,
financial literacy continues to haunt the
accessibilities of innovation
 Regulatory Uncertainties
 Congestions on Digital Platforms
 Vested interest continue to create concentrations
in different segments of the industry.

12. Challenges
 Increasing number of online frauds
 Cyber Attacks
 Massive Theft of important financial information
 Money Laundering (Cyber Laundering)
 Terrorist Financing
 Illegal Money (Smuggling/Drug Trafficking/Flesh Trade)
transfers
 Proceeds of other Illicit financial flows (Tax Evasions /
Corruption ) transferred easily
 Cryptocurrency

13. Distribution

14. Impact on India
 Non-bank entities have been introduced in the
issuance of pre-paid instruments (PPI), including
mobile and digital wallets
 Launching of grid-wise operations of CTS,
interoperability on NACH, IMPS, NFS, RuPay (a
domestic card payment network), APBS and
AEPS (which are an important part of the financial
inclusion process), National Unified USSD
Platform (NUUP), UPI and the BHIM application
[Gandhi (2016)]

15. Impact on India
 ‘T or T+1’clearing of cheques enabled by CTS
and the clearing house infrastructure, the
NEFT, the IMPS, mobile banking/payments
and the security aspects of card payments

16. Volume & Growth Rate

17. Value and Growth Rate

18. Distribution of alternated
Payment Mechanisms

19. Policy Initiatives
 Promotion of BHIM App
 Government will strengthen the Financial
Inclusion Fund
 National Electronic Funds Transfer (NEFT)
system – Settlement at half-hourly intervals
 Rationalisation of Merchant Discount Rate
 Storage of Payment System Data

20. Emerging Global Trends
 Alternate payment channels such as
contactless and wearables gain acceptance
 As merchants start providing Augmented
Reality(AR) assisted shopping experiences,
they will likely look for an AR-integrated
payment gateway that delivers a superior
customer experience

21. Emerging Global Trends
 Distributed ledger technology (DLT) such as
blockchain eliminates intermediaries by using
algorithms to verify and authorize payment
transactions securely
 As global cyberattacks rise, regulators focus
on data-privacy law compliance

22. References
 Digital Payment Book, Niti Aayog