41
Payments Regulation in Asia
India PAYMENTS MIX
India pushed to formalize its economy in 2016 from a predominately cash based and regionally managed system. At the time, India was dealing with severe tax collection issues, counterfeiting of currencies, and a large informal economy. 83 To address this, the Indian government called for demonetization and removed all 500 and 1000 denominations of the rupee. 84 These were the two largest denominations and accounted for nearly 86% of the currency in circulation. 85 In tandem, that same year India provided nearly all households with a bank account, and the Unified Payments Interface (UPI), a digital payments platform, was launched. 86 UPI is an interbank system that facilitates instant peer-to-peer and business-to-consumer transactions and provides the infrastructure on which dozens of digital wallets operate. 87 UPI facilitates peer-to-peer, interbank, bill pay, and retail transactions between merchants and consumers. 88 UPI also allows for digital wallet use on the app from international providers such as Amazon Pay and Google Pay as well as domestic participants such as Paytm and PhonePe. 89 The growth of UPI utilization has led to material changes in the payments mix of India for both ecommerce and at the point-of-sale. Between 2017 and 2022 there have been major shifts in both point-of-sale (POS) and ecommerce payments’ mixes. Of the payment methods shared across both POS and ecommerce transactions, digital wallets saw the largest increase in share of ecommerce transaction value when comparing 2017 to 2022. This can be attributed to the realization of the Indian government’s goal of digitization of its economy to a more cashless society. 90 For example, by 2022, digital wallets captured most of the cash volume from POS transactions (Figure 15), growing to be the most popular POS payment method.
While alternative payment methods (APMs) have grown into the largest payment method for POS transactions, this has mainly come at the expense of cash usage and even still,
83
https://www.rbi.org.in/commonperson/english/scripts/FAQs.aspx?Id=1923
84
https://www.economist.com/finance-and-economics/2024/01/15/how-strong-is-indias-economy-un -
der-narendra-modi 85 Ibid 86 Ibid 87
https://www.npci.org.in/what-we-do/upi/product-overview
88
Ibid
89
https://www.business-standard.com/economy/news/how-are-upi-wallets-different-from-upi-all-that-
you-need-to-know-123050400877_1.html 90
https://www.economist.com/special-report/2018/05/04/indias-digital-platforms?utm_medium=cpc. adword.pd&utm_source=google&ppccampaignID=17210591673&ppcadID=&utm_campaign=a.22brand_pmax- &utm_content=conversion.direct-response.anonymous&gad_source=1&gclid=EAIaIQobChMIi-i566aIhAMVh8_ CBB03kgOdEAMYASAAEgJZBfD_BwE&gclsrc=aw.ds
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