Digital Payments in Rural India – over next couple of years.

Predicting specific trends can be challenging due to various factors that could influence the trajectory of digital payments in rural and semi-urban India. However, based on the existing momentum and ongoing developments, I can speculate on potential directions this trend might take, and this gives me the confidence to go with a 100% digital payments mandate for Shunya. My confidence is boosted by the fact that UPI transactions in rural and semi-urban India increased by 118% in 2023, with a 106% increase in value.

The short-term trends point towards:

  1. Continued Growth: The trend of increased UPI transactions in rural and semi-urban India is likely to continue. Factors such as continued government initiatives, improved internet infrastructure, and growing smartphone penetration will contribute to sustained growth.
  2. Further Adoption: As digital literacy improves and more people become comfortable with using smartphones and digital payment platforms, the adoption of online payments is expected to increase. I recently spend a few days purposely avoiding any cash payouts in rural UP and I was pleasantly surprised at the lack of complications – rural merchants of all kinds have adopted to the UPI / Paytm / Google Pay.
  3. Expansion of Services: Digital payment providers are likely to expand their services and offerings to cater specifically to the needs of rural and semi-urban users. This could include features such as language localization, simplified user interfaces, and tailored financial products like buy-now-pay-later to better serve these demographics.
  4. Government Support: Continued government support through initiatives like Direct Benefit Transfers (DBT) and other subsidy programs will encourage more people in rural areas to adopt digital payment methods. The government’s focus on financial inclusion and promoting a cashless economy will further drive the adoption of online payments. Was a little disappointed to see that some of the village based milk-collection centers were making cash payouts every fortnight, however, I think that will change fairly quickly.
  5. Infrastructure Development: Further improvement in internet connectivity and infrastructure in rural areas will also contribute to the growth of online payments. Investments in 5G technology and expansion of broadband services will enable smoother and faster digital transactions, encouraging more people to use digital payment platforms, however, internet availability and power (electricity) is now a non-issue.
  6. Partnerships and Collaborations: I expect the digital payment providers to form partnerships with local businesses, government agencies, and non-profit organizations to facilitate easier access to digital payment services in rural areas. Collaborative efforts to address specific challenges, such as connectivity issues and last-mile delivery of financial services, will help accelerate adoption.
  7. Security and Trust: Ensuring the security of online transactions and building trust among rural users will be essential for sustaining the growth of digital payments. Continued efforts to enhance security measures, educate users about safe online practices, and address concerns related to fraud and data privacy will be crucial in maintaining user confidence. I was very happy to hear one of the merchants talk about benefits of receiving digital payments – lesser trips to the bank (or intermediaries) to deposit cash, lack of soiled notes, “more savings”.

Overall, while it’s difficult to predict the exact trajectory of digital payments in rural India, the current trends suggest an extremely positive outlook with continued growth and adoption of online payment methods. My prediction – Bharat will pleasantly surprise us over the next few years.