The Future of Money: Will India Go Completely Digital?

Let’s start by focusing on numbers. In the financial year 2017-18, the total volume of digital payment transactions stood at 2,071 crore. By 2023-24, this number surged to 18,592 crore, representing a Compound Annual Growth Rate (CAGR) of 44%. This impressive growth highlights the rapid shift towards digital financial transactions. 

The financial landscape of India has gone through many transformations over the past decade, especially transitioning from a cash-based economy to digital payments. This shift has been driven by technological advancements, government initiatives, and a change in consumer behaviors. Now, the question arises: Is India on the path to becoming a completely digital economy? Let’s try to find the answer.

Decline in Cash Usage

We are very well aware of Unified Payments Interface (UPI) now. Launched in 2016, UPI has revolutionised the payment landscape by enabling people to do instant and hassle-free money transfer to each other using mobile devices. In the first half of 2024 alone, UPI transactions reached approximately 78.97 billion, marking a 52% year-on-year increase. By the end of the financial year 2023-24, UPI accounted for over 75% of the total transaction volume in India’s retail digital payments. This shows people’s adaptability to UPI. 

The Reserve Bank of India’s Cash Usage Indicator (CUI) reveals that the share of cash usage in private final consumption expenditure decreased from 81-86% in January-March 2021 to 52-60% by January-March 2024. This decline indicates a significant shift in consumer preference towards digital modes of payment.

Role of Government in Promoting UPI

Undoubtedly, the Indian government has played a crucial role in promoting digital payments. Various initiatives, frameworks and policies have been introduced to encourage cashless transactions and enhance the digital payment infrastructure.

Launched in 2015 by the Indian government, the Digital India initiative is transforming the country into a digitally empowered society. Under this program, multiple schemes, such as the Pradhan Mantri Jan Dhan Yojana (PMJDY) and DigiDhan Mission, are promoting financial inclusion and expanding access to digital transactions. PMJDY has provided millions of people with bank accounts. 

To drive digital payments further, the government introduced Unified Payments Interface (UPI). Developed by National Payments Corporation of India (NPCI), it is a system that powers multiple bank accounts into a single mobile application, allowing instant money transfers between banks through mobile apps. The adoption of UPI has been fueled by Google Pay, PayTM, PhonePe and many similar platforms. 

Furthermore, Reserve Bank of India has also played a crucial role in shaping the digital payments landscape. The Payment and Settlement Systems Act, 2007, empowers the RBI to regulate electronic payments, ensuring a secure and efficient digital transaction ecosystem. Other schemes by government, like Lucky Grahak Yojana and DigiDhan Vyapar Yojana offer cashback rewards and discounts for digital payments. Moreover, initiatives such as e-RUPI, a digital voucher system, and the push for a Central Bank Digital Currency (CBDC) also point towards India’s commitment to digital transformation. 

UPI Goes Global 

Many countries across the globe are increasingly adopting UPI to enhance their digital payment systems and strengthen financial ties with India. This expansion not only allows travellers and businesses to make seamless transactions but also makes cross-border payments easier and more efficient. Many countries, namely Bhutan, Nepal, Singapore, UAE, Sri Lanka and Mauritius have adopted UPI. 

TIMELINE OF UPI EXPANSION WORLDWIDE

• July 2021 – Bhutan

First country to accept UPI for QR code-based payments.

• February 2022 – Nepal

First country outside India to officially adopt UPI for its digital payment system.

• February 2023 – Singapore

UPI linked with PayNow, Singapore’s real-time payment system.

• August 2023 – France

UPI introduced, starting with the Eiffel Tower as the first acceptance point.

• October 2023 – UAE

Merchants and businesses started accepting UPI payments.

• February 2024 – Sri Lanka & Mauritius

Both countries adopted UPI to improve digital transactions.

Challenges 

Needless to say, the journey to becoming a 100% cashless economy is not without hurdles. Think about it, how often do you still see people using cash for daily expenses like buying vegetables or paying local shopkeepers? Despite the convenience given by UPI to all, there are many challenges that prevent a full transition to digital payments.

• The Digital Divide – Is Everyone Connected?

Imagine a small village where people still rely on cash because they don’t have mobile phones or have no access to the internet. While people living in urban areas have smartphones and access to high-speed connectivity, many rural and semi-urban areas still struggle with poor network coverage and proper digital infrastructure. How can digital transactions work if the basic requirements are missing? 

According to a report by Telecom Regulatory Authority of India (TRAI), the total number of Internet subscribers reached 936.16 million at the end of December 2023, however, a significant percentage of the rural population remains offline. Although efforts are being made to ensure such services reach rural areas, achieving a fully digital economy remains a distant dream if the gap isn’t bridged.

• Privacy Concerns – Who Controls Your Data?

Whenever we do any digital transaction, it leaves a digital footprint. While UPI is adding convenience in the lives of many, it is not privacy friendly. Data tracking, loss of financial privacy and government surveillance are some of the concerns that comes along with digital transactions. Unlike cash, which offers complete anonymity, digital transactions can be monitored, raising ethical and legal concerns.

• Technical Glitches & Transaction Failures

Have you ever tried making a UPI payment only to see “Transaction Failed”? Sometimes, servers go down, banks face issues, or networks become unstable. This leads to failed transactions, delays, or money stuck in limbo, leaving us hopeless. Immediately, we switch to paying in cash.

If people face frequent glitches, they may lose confidence in digital payments and revert to cash. Consistently improving the reliability of digital payment systems is crucial.

• Dependency on Cash 

Do you notice many small vendors, auto-rickshaw drivers, or even your neighborhood tea stall preferring cash over digital money? Although the shift is underway, the comfort of physical currency is so deeply rooted in Indian society that it’s going to take due time to psychologically adapt to digitalisation. Many believe cash is simpler, doesn’t require a phone or internet, and avoids transaction fees.

Even businesses sometimes prefer cash transactions to avoid tax scrutiny or banking formalities. Until digital payments offer the same level of ease and acceptance as cash, some people will always hesitate to make the switch.

• Cybersecurity Concerns

How many times have you hesitated before clicking on an unfamiliar payment link? Cyber fraud, phishing attacks, and data breaches have made people cautious about digital transactions. According to the RBI, India saw over 13,000 reported cases of digital fraud in 2023, ranging from UPI fraud to fake banking apps.

People ask, “What if my money disappears?” or “Is my personal data safe?” For digital payments to become universal, strong cybersecurity measures, awareness programs, and strict regulations are essential.

• Digital Literacy and Awareness 

Many people, especially the elderly or those unfamiliar with technology, struggle with digital payments. Have you ever had to teach your parents or your relatives how to use Google Pay or Paytm? Without proper digital literacy, people may fear making mistakes, falling for scams, or simply not understanding how these systems work.

Future Outlook

The trajectory suggests that India is moving towards increased digitalisation of its financial system. The current scenario suggests that this shift towards digital payment transactions will continue to grow, owing to government policies, change in consumer behaviour and technological innovations.

We must admit that India stands at a pivotal juncture in its financial evolution. Therefore, addressing and overcoming the prevalent challenges is the need of the hour. The Indian government and fintech companies are expanding internet access, strengthening cybersecurity, increasing awareness, and improving digital infrastructure, which can surely contribute towards making India a cashless economy. The transition will take time, but with collective and continuous efforts, it’s not impossible.

Must Read:

• How Professional Property Management Saves You Money in the Long Run
• Smart Pumps: The Future Of Fluid Management Systems
• Ten Strategies For Hotels To Ensure Safe And Secure Payments For Visitors
• Phovesto Powers: Engineering the Future of Energy
• Buy Now, Pay Later: The Future of Flexible Shopping

TGH Editorial Team

Our team of authors at The Global Hues comprises a diverse group of talented individuals with a passion for writing and a wealth of knowledge in their respective fields. From seasoned industry experts to emerging thought leaders, our authors bring a wide range of perspectives and expertise to our platform.

See Full Bio