A life without paper money and coins in your wallet? Despite the advance of mobile payment systems, it is still difficult for some to imagine. In India, which was a pure cash company until a few years ago, mobile payment has seen rapid growth in recent years. The change was not entirely voluntary: In November 2016, the Indian government declared bills to the value of 500 and 1000 rupees invalid with immediate effect – and thus over 80 percent of Indian cash (1000 rupees currently equals around 13 euros). With the cash reform, the government under Prime Minister Narendra Modi declared war on corruption and black money. The old bills had to be exchanged or paid into a bank account first. The subcontinent,

Rise of private FinTech

The cash shortage that rose from the reform has forced Indians to make online payments. An app for digital payments released by the state at the turn of the year, the Bharat Interface for Money (BHIM), has already been downloaded millions of times.

But it was the private sector which saw a real boom with private digital payment providers recording immense growth. For example, the Indian Fintech – Paytm which has grown exponentially and now has around 350 million users, the number of its customers over the past twelve months. Paytm is a kind of digital wallet that can be used both in cash and via internet banking, Credit card and debit card. 

The messenger service WhatsApp, which belongs to Facebook, has also jumped into the fray and introduced its digital payment service in India.  As does Google which launched its Android Pay payment service in India in 2017.

It is not just giants like Google and Facebook who are entering the market but other startups like Spay India, Instamojo and Razorpay etc. have also seen a sharp rise.

In addition to the cash reform, the Aadhaar program is seen as another driver for the digitization of India. Since 2009, 98 percent of the 1.25 billion Indians have been recorded in a central database. In addition to names, photos and origins, biometric data are also collected, and every Indian receives their own digital Aadhaar number. This means that in the future, even highly complex business deals will be possible using iris scans or fingerprints.

The government provided Aadhaar card holders with toll-free bank accounts. More than 200 million Indians already have an account linked to the Aadhaar number. The Indian central bank recently announced the introduction of a uniform payment system based on the digital identification number.

Rapid modernization of payment transactions

Up until the cash reform, modern payment methods, e-payment and mobile banking, especially outside the metropolises of Delhi and Mumbai, had a shadowy existence. Experts doubted that this would change fundamentally in the short term. This was due to the lack of network coverage, but that is also changing rapidly now almost 50 percent of India’s population has internet access, with 740 million smartphone users which is a sharp rise from 350 million users a few years back.

The only real issue that India faces in terms of digitization is that according to estimates by an auditing company PWC, 233 million Indians do not have a bank account. But private FinTech companies like Paytm and SpayIndia are trying to circumvent this problem by making the use of digital wallets easier and easier and adding more and more amenities.

Nevertheless, the forecasts for the mobile payment segment in India are very optimistic: the transaction volume in 2017 was around 71 million euros. According to the forecast, a transaction volume of 2,317 million euros will be achieved by the end of 2021; this corresponds to an annual growth of 138.7 percent.

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