The nature of money is to evolve with time. Digitization of Currency is a landscape of constant development in payments.
- Over the past few years, the money has fast-tracked into digital transactions with various cutting-edge technological approaches.
- The digital currency took the wind and became one of the preferred methods of transactions since the launch of ‘Digital India’ initiative in India. The landscape of digital payments was whitespace before expanding like wildfire.
- Owing to better innovative approaches, consumerism in this sector has changed. On top of this, the pandemic gave a strong push and promoted contactless payments.
- The Digital Payments Global Market is expanding. Statistics are enough to highlight the changing trends and preferences for digital payments.
Efficiency over Convenience
- Automatic payments by direct system integration and self-curb of payments are assumed to be upcoming.
- Transaction is seamless now with the potential to go almost invisible. The gist of constant evolution doesn’t lie in the convenience of the digital system but in the efficiency it withstands.
- Banks and other financial systems are actively understanding the world of analytical changes and adapting to digital methods. Many fin-tech start-ups have risen in the past few years providing an ecosystem of frictionless payments relying on Infotech and digital gateways.
- Most Digital platforms don’t require additional costs, attracting a major crowd to consider shifts. Convenience is just an added benefit of efficiency promised in Fin-tech services.
- Many countries like Europe, India, and the US have strict regulatory guidelines to keep a check on financial movements and institutions which is harmful to the consumers. There’s continuous pressure on banking institutions to change with the constantly changing nature of the currency.
API(Application programming interface) in banking
- It can improve security by reducing payment frauds and making the integration systems simpler.
- Open-source API platforms are a key to resolving and dealing with threats in the banking sector. Not to ignore the fact, UPI (Unified Payments Interface) has become available in all smartphones.
- From the consumer’s view, the portal is just a click away with assured security, saving the time involved with banking processes such as cash withdrawal, payments, and transfers.
- For example, earlier the transfer of payments cross-border was a lengthy process, taking up to 3-4 working days but with the dawn of digital availability, the process is reduced to an hourly time frame.
- Perhaps, the reason behind gradually increasing competition in the market of digital wallets makes only the cheaper, most secure, and acceptable option stand out.
Turning wheels of innovation
Developing countries like India have been continuously Working towards transforming their UPI ecosystem. The digital rise is enabling banking and other payment sectors to monetize in two unique ways.
- Promoting organizational specific payment platforms: Providing an easy payment option will bind the customer to the bank; leading to new product propositions including micro-mortgages, financial management, and investments.
- Creating a wholesome customer profile: By maintaining balanced all-rounded data of a customer profile, providing personalized services becomes easier. Showcasing better data to consumers will in turn lead to a higher return on investment, better market, and improved segmentation.
- Recently jumped into the market with ‘Journey in the Second Decade of the Millennium’- A booklet on Payments System, highlighting the key moments from 2010-2020 such as the introduction of wallet apps, the fast expansion of digital payment methods, etc.
- RBI is looking forward to supervising the new evolving payments system under The Payment and Settlement Systems Act, 2007.
- Under this act, the payment system is defined as “a system that enables payment to be effected between a payer and a beneficiary, involving clearing, payment or settlement service or all of them, but does not include a stock exchange”.
- Various Payment System Operators are authorized by RBI in India. Some of them are TReDS platform, ATM networks, and NPCI.
- It plays an essential role in operating retail payment systems in India and providing infrastructure to the banking system for both physical & electronic payments.
- All the advanced innovations in retail banking are brought about by NCPI such as UPI, IMOS, RuPay, and Aadhaar-enabled Payments System (AePS). It is the backbone of leading developments in the BFSI sector.
- Currently, NPCI is actively working to expand RuPay and UPI internationally. Indian Financial Network abbreviated as INFINET is a group of Financial Institutions and RBI & its member banks intending to improve banking efficiency and effectiveness via innovative channels like home banking, internet banking, etc.
- The reason behind continuous innovations in Digital payments owes to the increased availability of mobile and internet services.
Pandemic deserves the credit
- The impact of Covid-19 on digital evolution is uncanny, pushing the button of advanced digital methods.
- The government is also putting a focus on frictionless payments.
- Newer payment mechanisms are expected to enter the banking, finance, and insurance services sector to aid the customers. The goal is to remain transparent and secure.
- The government also plans to stay on the front foot for newcomers entering the market. In the government’s interest, digital payments will have lower transaction costs and high tax revenues.
- It’s a win-win situation for both government and consumers. Rather than focusing on profitability, it’s primal to keep users as the central force in future developments.
- This exciting payment journey will stand out with robust infrastructure in place.