Digital payments in India have witnessed a steep growth curve in the past few years, giving impetus to the government’s aim in creating a digitally empowered economy, which is ‘Faceless, Paperless, Cashless’ under the Digital India movement. According to the Reserve Bank of India’s (RBI) digital payment index, there was a 40 per cent growth in digital payments across the country, over a year, through September 2021. In volume terms, the CAGR for the past five years has been 42 per cent. While the adoption of UPI has been pegged as one of the foremost reasons for this exponential growth, other factors such as new players entering the payment ecosystem, innovations in technology, initiatives to address customer convenience, government incentives and forward-looking regulatory changes, have unequivocally added to this growth.

India has been at the forefront of global innovation in digital payments, as per a report by PwC on What Lies Ahead for Digital Payments. In fact, over the past decade we have witnessed some major breakthroughs in the form of Aadhaar and UPI, it is anticipated that technology and innovation will continue to fuel the sector in the coming years too.

Technology has been a huge disrupter in the world of online payments, propelling faster and secure money transactions. According to a Research and Markets report that explored 800 million Indian mobile payment consumers, the Indian digital payments industry stood at INR 2,153 trillion in 2020 and will grow at 27% CAGR to reach INR 7,092 trillion by FY25. With the passage of time, innovative technologies and interoperability are being used to solve the innumerable complex problems in India, including that of bridging the digital divide, and encouraging financial inclusion. In fact, with the advancement of technology, developers and fintech brands have been able to identify and iron out several issues. Take the examples of how security, Artificial Intelligence (AI) has played a pivotal role in identifying online frauds and with companies investing in AI application development, they have been able to mitigate risk for both themselves and consumers.

The future will witness rapid transformation in this sector with features such as voice / speech / audio enabled commands, which are already changing the way we control our gadgets and appliances. As these technologies become efficient and accurate, fintech brands will look to incorporate them to deliver superior experiences for customers.

Another innovation that will be leveraged in the payments sector is the use of Digital Ledgers or Blockchains. Their foray with digital currency is now well known and many regulators are finding ways to strike a balance between autonomous currencies and digital payments. Being significantly decentralized, anti-fraud and business continuity driven DLT’s will surpass our expectations to establish the technological governance, to fool proof digital transactions for years to come.

India has been regarded as a pioneer in the field of fintech, with the number of recent unicorns and companies expanding through public listings, standing testament to this. As the ecosystem continues to grow, it is important for brands, operators, and authorities to take cognizance of what will be required to fuel further expansion. While innovation and consumer behaviour will play a role in dictating trends, there is tremendous pressure on infrastructure required to support the expected growth in digital transactions.

With increasing requirements for data localisation, cyber security etc., digital payment service providers will have to invest more on governance and risk mitigation mechanisms. Therefore, it becomes important for fintech companies to consider sustainable technology solutions that can be beneficial in the long run. A well-orchestrated framework with focus on affordability, growth, and sustainability of the ecosystem, is the growing need of the hour.