View: Despite being the global leader, India has only scratched the surface in real-time payments

Prime Minister Narendra Modi's statement while addressing the Indian community in Berlin recently underscored India’s affinity for real-time payments. Driven by access and innovation, India has achieved unrivalled success in real-time payments — unparalleled anywhere else in the world.

With a stated aim to provide every user with safe, secure, and convenient payment options, there is a considerable push from the Reserve Bank of India (RBI) for easy access to real-time payments for all Indians, as outlined in its ‘Payments Vision 2025’ strategy: which seeks a three-fold jump in real-time payments nationwide and expects UPI to achieve an average annualised growth of 50 percent.

It is a goal that looks increasingly achievable. The recent Prime Time for Real-Time 2022 report by ACI Worldwide predicts that India will continue to outperform forecasts, with real-time payments forecast to grow at 33.5 percent CAGR, and reach 206.2 billion transactions by 2026, up from the 48.6 billion real-time transactions recorded in 2021.

Amongst the key factors facilitating this growth are increased access to the internet and the inclusion of merchants to help drive access and adoption. The growing access to smart devices and broadband connectivity in tier III cities and beyond is expected to maintain the continued rapid adoption of real-time payments across the heartlands.

While almost 60 percent of the rural population is still not actively using the internet, the overall number of active Internet users in India is expected to rise by 45 percent over the next three years, reaching 900 million by 2025.

Meanwhile, merchants have been playing their part too. The huge increase in QR code usage has increased convenience for many consumers and more importantly, helped provide access for those less well educated. Scanning barcodes, simplify the payment process and bypassing having to navigate multiple menus or mobile applications – granting access and inclusion to millions.

This simplified option and accelerated adoption have the added advantage of benefiting local shops and small merchants, who often wait days for settlement, adding pressure on their cash flow. Instant settlement improves liquidity, provides an up-to-the-minute picture of the business financials, and ultimately eases cash flow pressure.

Perhaps one of UPI’s greatest achievements has been how it has used mobile phones and internet connectivity to enable last-mile delivery of financial services to customers in tier III and tier IV cities. This has helped paved the way for faster adoption of real-time payments and increased financial inclusions for millions.

It has also helped overcome the lack of knowledge and trust in digital transactions, making them the most trusted and widespread payment method in the country.

Yet, although the smartphone user base continues to grow rapidly, 40 percent of all mobile phone users in India still use basic feature phones. To help address this, the RBI implemented interactive voice response, IVR, and a UPI pin-protected service for making payments which utilise the phone networks to bypass the internet: a huge advance for mass inclusion and decentralization of digital banking given the inconsistent internet connectivity and low financial literacy across the country.

The move to provide more avenues and greater access for consumers using UPI is likely to increase adoption even further. The latest RBI initiative sees the integration of credit cards with UPI - allowing users to use their cards to make payments without the need to physically present them at a point-of-sale terminal.

This increases card security by reducing the chance of fraud and helps customers, with insufficient funds in their account at the time, to pay for small-ticket transactions in restaurants and grocery stores.

There is no question that India has achieved notable success in the digital payment ecosystem. However, the country still has a long way to go before It truly fulfils its mandate to 'provide every user with safe, secure, and convenient payment options.'

The remoteness, varying degrees of connectivity, and unstable power supplies across the country, combined with the cost and complexity of the latest mobile devices and technology still conspire to hinder full adoption.

Of course, the metropolitan areas will continue to drive growth and maintain our global leadership in the short-term, but if we truly want to be defined as providing access for all, new approaches to expanding reach beyond tier I and II cities and overcoming the challenges of connectivity and remoteness will have to be found.

The initiatives surrounding QR codes to simplify usage and overcome education gaps are a huge step in the right direction. But for true nationwide coverage and accessibility, there will need to be greater efforts to incentivise delivery to the heartlands.

India has come much further in its real-time journey than any other country, and in a much shorter period. The next stage of our real-time development is likely to take much longer, and require a new set of partners, skills, and technologies. In that respect, it really has just scratched the surface.