Indians ditch cash as QR codes and apps like PhonePe, Paytm make digital payments ‘much easier’

On the streets of Kherki Daula, a village outside the tech hub of Gurugram in northern India, Icha Lohar holds her young child, as she prepares for work selling claypots. She is one of millions across the country who make a living selling roadside items – but the old-fashioned routine of trading goods for money is now moving into the digital age. In front of Lohar’s stall is a small box with a speaker and a machine-readable QR code. Her customers use the code to make an online payment and the speaker, which connects to the internet via a built-in SIM card, reads out a payment confirmation message, letting sellers and buyers know the money has been received. These QR codes and sound boxes can now be found throughout India, as the country of 1.4 billion people transitions from a cash-first to a cashless society. “Most of the people who come here use the code to buy the pots,” Lohar said. “Very few people are carrying cash now.” Lohar, whose family lives in the shacks they built on the same road, does not have a bank account. It was a family friend who suggested they set up a QR code last year. He made one for them using his own bank account and Aadhaar, a government identification number. She now tracks her money through an app, and retrieves cash from him when needed. “For the first few days I tried it, the technology was a bit confusing,” she added. “But over time, I learned to use my phone and it has become simple and more convenient than cash sometimes.” Asean planning regional payments network that could benefit migrant workers The codes are part of a home-grown scan-and-pay system that has transformed the way businesses in India operate. Hundreds of millions of people across the country can access this online transaction system, using apps like Paytm and PhonePe. For years, India had been lagging behind other Asian economies such as Singapore, South Korea and China, where QR codes are ubiquitous. China first stepped into the world of digital payments in the early 2000s, and over the past decade has evolved to produce super apps like Alipay and WeChat, which incorporate everything from social media to ride-sharing to digital payments. Although relatively new to the game, India has significantly expanded its fintech landscape since 2016. Today, government data shows nearly 40 per cent of all payments in the once cash-only economy are digital. This amounts to almost US$3 trillion, a number set to rise to US$10 trillion by 2026, according to a recent report by PhonePe and Boston Consulting Group. Tiny signs and QR-coded sound boxes can now be found in roadside shops across India, where vendors who sell everything from cigarettes to paan desserts and handcrafted jewellery have begun accepting digital payments. But that’s not all – the codes are also found in family-run stores, restaurants, medical clinics and in high-end shopping centres. According to the National Payments Corporation of India (NPCI), nearly 300 million people and 50 million merchants currently use the system. More online than ever This online payment system is perhaps the most pronounced example of India’s digital revolution that aims to integrate more of the country’s massive population into its formal economy. In recent years, Indians have been embracing new technology at an increasingly rapid pace. The country now has nearly 700 million smartphone users, according to rating agency ICRA. Fierce competition among India’s telecoms providers has resulted in some of the lowest mobile data rates in the world. ICRA estimates that on average, Indians consume almost 17 gigabytes of mobile data monthly – higher than the 15GB consumed in North America and 13GB in China. In addition, the increased availability of cheap smartphones and the rapid growth of social media has also enabled more Indians to access the internet. It’s [been] transformative for an economy that is predominantly cash-centric and informal Academic Karthik Nachiappan on India’s digital-payment network The greatest benefit of a digital-payment network is how it has helped millions of unbanked people in India tap into the financial system and make transactions with ease, said Karthik Nachiappan, a research fellow at the Institute of South Asian Studies at the National University of Singapore. “It’s an undeniable public good in that sense,” he said. “It’s also transformative for an economy that is predominantly cash-centric and informal.” Private consumption is the largest driver of economic growth in India, and experts say a boost in tech consumption in both urban and rural areas is pushing forward its digital transformation. Should India credit Modi’s demonetisation for digital boom? Moving to a digital-payment infrastructure also appeared to become more of a necessity in 2016, when Prime Minister Narendra Modi’s government outlawed large-denomination currency in an effort to target undeclared “black money” and fight corruption. Almost instantaneously, 86 per cent of the country’s cash was demonetised. India’s heavily cash-dependent economy, and its small businesses in particular, were badly hurt by the move. So going digital became imperative for the government, observers say. It proved even more important during the Covid-19 pandemic with the increased demand for online shopping. How does it work? The Indian government launched its “Digital India” programme in 2015, hoping to achieve “faceless, paperless and cashless” financial transactions for people from all walks of life. To make this happen, it leaned on the Aadhaar initiative, which first launched in 2009 to provide every citizen with a biometric identification number. Now, the government says about 99 per cent of adults have an Aadhaar number that they can use to open bank accounts. Another initiative, the Unified Payments Interface (UPI), launched in 2016 by the country’s central bank, allows direct online payments from banks and mobile payment apps at no additional cost. In March, more than 8.65 billion transactions worth more than US$170 billion were carried out on the UPI, according to NPCI which oversees the platform. “UPI provides a state-led pathway that enables citizens to communicate and transact without their data being beholden to private actors like Google or Meta,” Nachiappan said. “Not all countries have the capacity or traffic to create such systems which makes them beholden to Big Tech as they rely on their applications.” Growing international appeal India has struck gold with the UPI system’s public-private partnership, experts say, but the government will have to make sure it doesn’t fall victim to the same troubles plaguing China’s mammoth digital-finance systems. “Questions linger on how effectively Beijing has regulated these Chinese fintech services given their horizontal expansion, penchant for gobbling data, and how they are compromising privacy, offloading risks to consumers,” Nachiappan said. “India’s experience can differ provided the regulatory architecture can be established to avoid such problems from overwhelming the system.” On February 21, India and Singapore launched cross-border connectivity between the UPI and the city state’s equivalent called PayNow, enabling low-cost and faster cross-border transactions. We will use the G20 narrative to push this digital transformation story of India to the rest of the world Amitabh Kant, Indian G20 coordinator And as India prepares to host this year’s Group of 20 summit, the country is hoping to promote its digital transformation story globally, according to Amitabh Kant, one of India’s top coordinators for G20 events. “We will use the G20 narrative to push this digital transformation story of India to the rest of the world and see how we can use this opportunity to transform the lives of citizens in the Global South,” he said. At a local-level, small-business owners are largely embracing the digital transformation. A few streets down from Ichar Lohar’s claypot stall, Shyam Ravidas, a cobbler, raved to This Week in Asia about how the online payment system transformed his shoe-mending business. He said he tracks his daily transactions, expenses and sales all on the same app, and also uses it to transfer money to his family members. “Around 90 per cent of my customers use digital payments. Things are much easier now. I used to have to run around looking for loose change and petty cash, but I don’t have that problem any more,” Ravidas said. “I also don’t lose money in commissions when I want to send money to my family members in my village, because we can just immediately transfer using our phones,” he added. “It has made life much easier for us small-town people.”

Indians ditch cash as QR codes and apps like PhonePe, Paytm make digital payments ‘much easier’

QR codes, part of a home-grown scan-and-pay system, are now plastered across many businesses in India, from family-run stores to luxury shopping centres Nearly 40 per cent of all payments are now digital in the once cash-only economy of 1.4 billion people, according to government data

QR codes, part of a home-grown scan-and-pay system, are now plastered across many businesses in India, from family-run stores to luxury shopping centres

Nearly 40 per cent of all payments are now digital in the once cash-only economy of 1.4 billion people, according to government data