HOW DIGITAL PAYMENT SYSTEM WORKS IN INDIA ?

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Introduction –

The Covid-19 pendamic lockdown stop the whole economy of the world and we discovered that new life after pendamic and also realize the importance of digital system of transaction in this period. The online trading increase tremendously after 2019 specially in India.As per the US private survey report India alone used digital payment system with USD 25.6 Billion in 2020, which is rise of 70% transaction compare to 2019 in India.

In 2022 Russia Ukrain was teach whole world that dependance on the world for any country is very difficult in world Politics and Economic purpose so after pendamic India drastically changes their policy for dependancy on other countries. Therefore formation of “Rupay” payment system and UPI latest digital payment system is the example of self depedant economy policy of India.

Before that US companies dominated the Indian market of Payment system and settlement system specially 80% market were capture by only two major companies i.e. Visa and Mastercard which expliot the Indian banking system by charging higher rate of service charges for their technology system of payment through Debit card and Credit Card system. So here we try to see the strategies of Indian Government to change the whole digital platform of payment system in India by forming “Rupay” and UPI payment system.

What is Digital Payment System ? –

The Digital payment system is mainly used with mobile, computer or electronic divices in place of physical currency while shopping,trading for goods and services through world wide. The technology companies are the main intermidiate between banks and customers/traders who provide technology like plastic card or code scanning payment system. For the International transaction SWIFT plays important roles for payment and settlement system.

The US Dolllar is the international currency and SWIFT CODE is used for international transaction and trade by using technology. The digital payment system is transaction that take place via digital or online mode with no physical exchange of currency. The buyer and seller with their concern bank use electronic medium to exchange money with their transactions within state or Worldwide.

Europe and America are leader in world market with digital technology provided, all the International tranactions are made through SWIFT which is fully dominated by Europe and America even though there is various countries are member in the SWIFT organization. When policital or economical sanctions done by the United Nation thourgh their other organization they used their power to control the digital payment system of that country, this experience was seen on Russia and Ukrain war.

Digital Payment System in India –

Now currently plastic money replaced with scanning code system and the Unified Payment Interface (UPI) specially in India. After Russia and Ukran war World trade Organization and the United Nation Organization sanctioned Internationally trade of it which is leasson to other countries of the world to make their economy self depedent otherwise every country will get these sanctions in future by political and economical influence decisions of the United Nation Organization.

The American companies are dominated with plastic money before 2010 in India but Indian Government changed their policy of digital currency in India. As far as internal transaction of digital payment system in India controlled by the Indian Government through NPCI which is the intitives of Reserve Bank of India and Indian Bank Association in India.

After 2019 the Indian digital payment system increased by 70%  in 2020 and share of world digital payment share of Indian Economy is number one in the world. That shows that how Indian digital payment system is Important in the world senario for the tech companies who provided services of technology for payment and settlement system in the world and specially in India.

US Company Mastercard & Visa in India –

As far as India is concern before the launch of “Rupay” payment and settlement system in India there was 80% market captured by Visa and MasterCard. Now in the Indian payment system “Rupay has 70% market share in Debit card system which is connected with their member banking system. In the Credit Card payment system Visa and MasterCard still has a monopoly in India.

The Gobal market of digital payment system is USD 68.61 Billion in 2020 which shows that the potential of the digital market of the world. As far as India is concern the digital payment system is the biggest market in the world and as earlier said that this market traded USD 25.60 Billion alose in the world and America is second .The American big tech companies approach to the US Government for protecting their market in India.

The violation of Reserve Bank of India’s rules and regulation by these American companies is the reason of prohibition of licensing of payment system and settlement system in India.The charges for every transaction is very high compare to Indian payment system. Which hamper the small sector retail market in India by curtailing their profit margin with these services so prefer to do the cash business transaction.

What is National Payment Corporation of India? –

The National Payment Corporation of India is formed by Indian Government to end the monopoly of forign companies like Visa and Mastercard in India. NPCI is the umbrella organization for operating retail payment system and settlement system in India. This organization was made under intitives of Reserve Bank of India and Indian Bank Association. The Payment and Settlement System Act 2007 was enacted in Indian Parliament to formation of NPCI.

The object of the NPCI is to provide payment and settlement system to the whole bank system in India which was dominated by American companies like Visa and Mastercard who charges 1 % – 3%  which is very for small retail businesses in India. NPCI was formed to provide platform to all the Indian government banks and private banks to provide system of payment which is cost less than private players.

The main core promoters of NPCI is State Bank of India, Punjab National Bank, Canara Bank, Bank of Baroda, Union Bank of India, Bank of India, ICICI Bank, HDFC Bank, Citi Bank and HSBC Bank in India. The share holding is alloted to more than 56 banks and payment service operator, payment banks small finance banks later added in 2020 by Reserve Bank of India.

Indian “Rupay” & World Market –

The “Rupay” was introduced by National Payment Corporation of India in 2012 earlier it was named by “ndiaPay” but finally “Rupay” was launched. Earlier it was very slowly grew in India but after pendamic period in 2019 all of sudden situation of Indian market was changed and most of the transactions were made through digital payment system. The “Rupay” has 60% market share in debit card section in India and in the Credit Card section still having monopoly of Visa and Master.

The Reliance Jio came with 4G revolution in India which gives boost to the “Rupay” payment system in India and NPCI increased their member banks in the organization by making protection through legislation. American companies approached to American Government to protect their market in India but Indian Government succeed in introducing their own payment and settlement system in India.

Indian Government is planning to introduced their payment system International level so they try to merge the technology system of payment like UPI and card payment system with International trade.So “e-RUPI”    this payment system is without card payment,digital payment App, internet banking access, the merchant can accepting UPI e-prepaired voucher. The e-rupi payment system is fast and secure which is using through sms or or QR code.

UPI Payment system in India –

The Unified Payment Interface (UPI) system is next level of technology in the digital platform of payment system in India. The main feature of this payment system is that various bank accounts with one single mobile app utilized in quicker and secure method of payment system. Earlier there was card payment system was dominated by multi national companies with debit card and credit payment system.

After downloading the specific app on our mobile it generat UPI code after connecting our banks every bank generates different UPI id and it use to make a payment without card numbers or any QR code scanning with faster than other digital payment system. It is works 24×7 with 365 days without interfearence of bank system fluently with our bank account balance amount.

The NPCI launced UPI in April 2016 with RBI Governer Raghunath Rajan with Google pay store which is quite successful product of NPCI where only 21 banking members were there when launching this product. In the Debit card payment system and the Credit Card payment system there is charges but it UPI system there is very low services charges is there which is negligable in percentage. Thats why it is very successfull payment system in India. The National Payment Corporation of India (NPCI) whoes inititives of UPI payment system introduced in India

Features of Digital Payment System –

  • The National Payment Corporation of India (NPCI) formed aftet 2007 by intitives of Indian Bank Association and Reserve Bank of India.
  • Earlier Computer technology used to trade online with world wide web this is the start of digital platform of digital money.
  • Anroid mobile comes with next level of revolution in digital payment system with Google pay, Phone Pay, Paypal application succeed in the world platform of digital payment system.
  • The organization SWIFT was formed IN 1973 by the United Nation with influence of Europe and America where US dollar is the International Currency for international trade.
  • The MasterCard, Visa and American Express these American companies dominated the plastic card digital payment system and settlement system all over the world.
  • In India through NPCI India introduced the digital payment system with “Rupay” and later with UPI payment system with anroid mobile aap.
  • The Inrdocution of “Rupay” by NPCI destroy the monopoly of Visa and MasterCard in India but these company still have the monopoly in the CreditCard section of the Indian Market.
  • The Rupay charged with 0.9% charges for transaction made by the customer where Visa and MasterCard charges high rate of 1% – 3% which is bad for economy of India is concern.
  • e-RUPI digital platform made by the NPCI for International platform where dominance of SWIFT is politically influence by the western countries which breaks through Indian payment system world wide.
  • The UPI payment system of the Indian Government is latest successfull digital platform where charges are negligable to the customers compare to card payment system of MasterCard and Visa.
  • After establishement of UPI and RUPAY card payment system in India, Visa and MasterCard complaint the policy of India to promote their own payment system to American Government.
  • In 2020 Indian digital payment system transaction increase by 70% compare to 2019 data and the value of these transactions are USD 25.6 Billion alone in India.
  • As per the Statista report the China has most anroid mobile used country in the world with 81% people use payment system of anroid mobile.
  • The Stanford Federal Credit Union is the first non profit organization introduced the world first online payment services in 1994.

Critical Analysis of Digital Payment System –

After Government implemented policy of every citizen have to be a bank account and to execute any scheme for the society requires bank account to transfer money directly to the beneficiaries of that scheme. So to avoid currption and use digital platform for implementing any government scheme, this the purpose given by the government. Privatization of the government banks and promotion of private banks invites the increase in deposit amount in banks.

Most of the citizens have very low income which is not afford to maintened minimum balance in bank account, So to implement the digital payment system efficiently in India need to be streigthen the purchase power of the citizens in India. Earlier digital platform was not grew in the Indian market because of Internet system in India but in 2017 it was solved by launching 5G technology through private company. Before formation of National Payment Corporation of India there was monopoly of multi national companies in India.

Even though after success of UPI payment system and the “Rupay” card payment system in India still on the online platform specially in Credit Card section and International Transactions we are not able to established ourself .Anroid mobile handling skills of the people of India is not as big as developed countries having and also purchase power of the citizens of India is still very low to dominate the digital platform of payment system.

Conclusion –

As we have seen the journey of digital platform system of payment in the world and its effect on Indian economy which is the biggest economy after the China in the world. The formation of SWIFT payment system through influence of European countries and America where they use this weapon as economic sanctions to other countries with political motive mostly. So Indian Government by taking lesson from this sanction against Russia decided to make policy of self dependence in technology.

Therefore after 2007 India step by step started to made a structure of digital payment system of their own earlier the American companies used data of Indian customers to their market strategies and stored it in their country . As per the Reserve Bank rules this was the voilation of rules and regulation of it. But dominance of their technology towards digital payment system in India, we are not able to punish or prohibit them without creating any substitute system.

So here we have seen the work of the NPCI towards the improving digital payment system in India and throughout the world. We have seen the success story of UPI payment system with banning the card system of MasterCard and Visa from India. As we know that dominance of western countries towardss technology of payment system of the world but India and China are successful in making their own digital payment system.

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