Users' perspectives on digital payments in India
Creators: name: Amol Kulkarni
name: Swasti Gupta
Publisher: name: Gates Open Research
Year: 2019

description: Transforming India is contingent upon enabling access to formal financial services to poorest of the poor. The Government of India has launched several initiatives in this regard. Most recently, the Pradhan Mantri Jan-Dhan Yojana (PMJDY) was launched in August 2014, resulting in the opening of 221 million bank accounts.However, the opening of bank account is just the first step in access to a whole range of formal financial services, including affordable insurance, credit, and pension. To be attractive enough for hitherto underserved and unserved, formal financial services must meet their specific goals and aspirations, be in tune with their daily expenses and income streams, and in sync with their income generation schedules.<br><br>Consequently, the move towards digital payments has the potential to fulfil the goal of financial inclusion in the long run. However, despite several modes of digital payments existing, the ratio of digital payments in total payments has remained low in India. In addition, the percentage of digital payments possibly decreases when one moves from urban to the rural user base. It has been argued that different modes of digital payments often act as an added convenience to existing digital payment users, and more often than not, fail to serve the rural populace.<br><br>Several reasons might exist for the inability of digital payment service providers to cater to the needs of semi-urban and rural populace. These could include lack of awareness and understanding about digital payments among such populace, inadequate availability owing to the high cost of operations in a low margin business (as non-bank operators are required to provide their services through banks), inadequate customisation and user-unfriendly applications, inefficient grievance redress.<br><br>However, there is a need to verify these assumptions through primary research on accessibility and experience of consumers and merchants with digital payments in urban and rural areas.<br><br>In order to understand state of access and experience of users in India with respect to digital payments, we conducted three user perception and behaviour surveys to gauge, <i>inter alia</i>, various aspects of digital payments, such as: trust, confidence, privacy, data protection, safety and security; awareness, access, usage and experience; benefits and challenges, respectively.<br> <br>Cumulatively, 5000 respondents were interviewed across diverse categories (consumers, merchants, micro and small enterprises, business correspondents, and entrepreneurs) from 11 states across India (Karnataka, Haryana, Madhya Pradesh, Bihar, Assam, Uttar Pradesh, West Bengal, Punjab, Andhra Pradesh, Maharashtra, Rajasthan) representing different demographic profiles.<br> <br>Our key findings and recommendations were submitted to the Reserve Bank of India Committee on Deepening of Digital Payments in India. These are as follows:	There is a positive correlation between the education of users, infrastructure availability and awareness of digital payments. However, there is a low conversion rate among aware groups indicating that mere awareness is not sufficient for deepening digital payments.	On an average, around 44% of aware disadvantaged groups (females, not young, rural, low/uneducated and low/ no income) and 50% of aware advantaged groups (male, young, urban, highly educated and high income) are users of digital payments.	Different users may prioritise divergent challenges to be addressed for enhancing the use of digital payments' modes. While consumers face challenges such as lack of interoperability and high processing charges, merchants face challenges with respect to expensive acceptance infrastructure, transaction failures and unaware customers.	There is a need to enhance trust in service providers by reducing fraud, improving convenience, and fixing accountability.	Digital payments applications need to be more user-friendly, consume lesser data and battery, be available in local language and use innovative tools to enhance usability.