Principal Advisor to Niti Aayog Ratan P Watal said with technological changes, there is a need to start looking at legislations
The report added that mobile payments are slated to rise from $10 Bn in 2017-18 to $190 Bn by 2023
The growth in total retail payments in value terms has seen a three-fold increase in 2017-18
As digital payments continue to pick up the pace in India, Niti Aayog in its report — Digital Payments – Trends, Issues and Opportunities expects the industry to grow $1 Tn by 2023.
Principal Advisor to Niti Aayog Ratan P Watal said, “There are technological changes happening around, so you have to also start looking legislations (Payment and Settlement Systems Act). The regulation should be such that it should allow new technology to come in very quickly. Technology also changes at a very faster pace than legislation.”
The PSS Act provides the necessary statutory backing to the Reserve Bank of India for undertaking the oversight function over the payment and settlement systems in the country.
Walal also added that there has been growing momentum in volume and value terms in digital payments after demonetisation. He emphasised that whether you see RBI or MEITY data, it’s much better than it was prior to 2016.
Ratan Watal Committee Report
On November 8, 2016 Prime Minister Narendra Modi announced demonetisation of INR 500 and INR 1000 notes. The impact of this was highly visible on various digital payments player including Paytm, RazorPay among others.
Constituted in August 2016, Ratan Watal Committee headed by Niti Aayog Principal Advisor Ratan P. Watal had submitted its report on digital payments to the Finance Ministry in December of the same year.
In its recommendations, the committee suggested:
- Making regulation of payments independent from the purview of the RBI.
- Called for an update of the current Payments and Settlement Systems Act, 2007.
- Highlighted the conflicting share ownership structure of the NPCI, advising the Finance Ministry to “demutualise” it from the payment system participants.
- Mobile payments are slated to rise from $10 Bn in 2017-18 to $190 Bn by 2023
- Only in 15 states higher volume payments are digitised.
- The Goods and Services Tax (GST) regime, rolled out in July last year, will have a huge impact on digital payments as it matures.
- The growth in total retail payments in value terms has seen a three-fold increase in 2017-18 than the trend rate of the last five years — 2011-16.
- The volume of overall payments steadily increased from 2011-12 to 2015-16, recording a compound average annual growth rate (CAGR) of over 28.4%. It is noteworthy that the growth in 2017-18 is much higher than the trend growth rate over the last five years (2011-2016),
“The Unified Payments Service (UPI) and Immediate Payment Service (IMPS) segments in terms of volume registered a spectacular growth during 2017-18. UPI, despite being a new product in the payment segment, has shown a great adoption rate among consumers and merchants,” he noted.
Digital Payments In India
One of the biggest players in the digital payments space, Paytm, has claimed that it is the largest contributor to the overall volume of UPI transactions in the country. It claimed that over 40% of all UPI transactions made in February 2018, amounting to 68 Mn, where made on its platform.
The digital payments growth in the country has been largely attributed to the availability of UPI 24*7 along with the ease of access, being adopted by various digital payments players including Paytm, Flipkart’s PhonePe, Google Tez and WhatsApp amongst others which provide a number of incentives, including cashback offers in return of digital transactions.
Google Tez claimed that it recorded over 250 Mn transactions since its launch in the middle of September 2017. We also have the Flipkart-owned PhonePe, which claims 42.4 Mn payments.
In a report, Credit Suisse predicted that India’s digital payments industry, which is currently worth around $200 Bn, is expected to grow five-fold to reach $1 Tn by 2023.
With digital payments growing manifold, and recent data showing a 30% growth in the value of UPI transactions for June 2018, the expected growth by Niti Aayog can mostly be achieved by continuous growth of new technologies like UPI.
