12/14/2018 Literature Review

Digital Payment system in India

Guided and Mentored by

Dr. Rupambika Bharathi

Prepared by
ARJUN B
ROLL NO: B2257
COURSE: MBA-A (2018-20)
INTRODUCTION:

The Digital India program is a flagship program of the Government of India with a vision to
transform India into a digitally empowered society and knowledge economy. “Faceless,
Paperless, Cashless” is one of professed role of Digital India.
As part of promoting cashless transactions and converting India into less-cash society,
various modes of digital payments are available like UPI apps, AED’s, USSD, credit cards,
debit cards, prepaid cards, E-Wallets etc.

Digital payment is a way of payment which is made through digital modes. In digital
payments, payer and payee both use digital modes to send and receive money. It is also called
electronic payment. No hard cash is involved in digital payments. All the transactions in
digital payments are completed online. It is an instant and convenient way to make payments.

If we talk about cash payments, you have to first withdraw cash from your account. Then you
use this cash to pay at shops. Shopkeeper goes to the bank to deposit the cash which he got
from you. This process is time-consuming for you and also for the shopkeeper. But in digital
payments, the money transfers from your account to the shopkeeper’s account immediately.
This process is automatic and neither you nor the shopkeeper is required to visit the bank.

Data Sources:

During the data collection process the researcher had used the primary method as well as
secondary method. In the primary method the researcher had used the primary data collection
to get the accurate and precise results and they had adopted the observation and investigation
method in their journal paper whereas in the secondary process they had used the readymade
data which were collected by others so that the report provides a reliable, suitable, adequate
and some specific knowledge. The secondary data has been collected from internet sources,
articles, newspapers, other sources.

OBJECTIVES

The specific objectives of the literature review is that it helped me in knowing many things
and by reading the journals had helped me in analysing the way the digital payment system

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had penetrated in India after the demonetization, especially in the rural areas. Also the
security threats associated with the payment systems has also been reviewed.

ABSTRACT:

The cashless economy will increase employment, reduce cash related robbery thereby
reducing risk of carrying cash. Cashless policy will also reduce cash related corruption and
attract more foreign investors to the country. In many countries introduction of cashless
economy can be seen as steps in the right direction. It is expected that its impact will be felt
in modernization of payment system, Reduction in the cost of banking service, Reduction in
high security and safety risk and also curb banking related corruption. Electronic banking will
be made banking transaction to be easier by bringing services closer to its customers hence
improving banking industry performance. The financial safety over the digital payment
channel is important for pushing the cashless economy idea. A major obstacle for the quick
adoption of alternate mode of payment is mobile internet penetration, which is crucial
because point of sale terminal works over mobile internet connection, while banks have been
charging money on card-based transaction which is seen in hurdle. India has been using
electronic payment system for many year now, However the retail sector still has
predominance of cash transaction and payment through cash is yet to pick up card is the one
of the most secure, convenient mode of cashless payment in retail market. .It is said that the
country's battle against fake currency is not getting easier and many fakes go undetected. It is
also stated that counterfeiters hitherto had restricted printing facilities which made it easier to
discover fakes

REVIEW:

According to the journal “ANALYSIS OF ADOPTION OF DIGITAL PAYMENT AND ITS

STIMULUS ON FINANCIAL INCLUSION IN INDIA” by Devendra Thenuan, Ayush
Agrawal, Pushpendra Thenuan tells us in their abstract that the India is a growing economy
and to increase the growth speed of India we need to minimize time and money on other
parameters. Therefore they urge the value of time spend for developing currency and its
withdrawal and emphasizes on the promotion of direct transaction through bank accounts. As
far as the visibility in transactions is more identifiable most probably you get the people's
trust because now they know the process and therefore now they can analyze a bit about the

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payment process. When people have more gateways for payment then it became easy for
them to process. The limited gateways can generate high risk, as people need to rely on them
because of limited availability of sources. Therefore as the mode of payment increases level
of comfort also increases and it minimizes the other risk factors. When people uses digital
payment platform as a mode of payment then they may get little incentives which gradually
attracting them to invest more and also because of this mode of payment the complete
transaction will be recorded automatically and therefore now people are forced to pay legal
taxes which gradually helps the economy. The digital payments industry in India will grow
10 times to touch $500 billion by 2020 and contribute 15% of GDP. As the primary source of
payment in India is cash therefore as of now people are not capable to analyze the purchase
that they make through digital platform and that makes them to incur more money and
relatively that increases the cash flow is the market which increase GDP and other factors
related to money. As some digital payment requires a data connection and therefore people
needs to have that pack to use such services. As per the research people feel insecure when
the use public Wi-Fi for making any digital payment through their device. In India people,
mostly hold their cash for emergency and that affects the cash flow in the market. The digital
payment system will force the people to hold their cash digitally (through a bank or any other
platform) because now they can use it directly through their account and therefore it will
increase the cash flow in the market which directly helps the economy of India. Connectivity
is an important parameter for digital adoption as telecom operator are every day coming up
with new services, providing methods to make the solution easier to use, implementing
techniques to improve security, launch of 4G is providing higher data transfer rate and
invention of new phones, more frequently is driving mobile users towards subscribing to
mobile banking services. Ease to Use is most important parameter for digital payment
adoption as their value proposition is based on speed, convenience and robustness. Safety &
Security and payment control is one of the major concerns for digital payment adoption as
Over 45% of respondents said they are not using their smartphone today for mobile payments
because of concerns around security. Technological Advancement is also consider as major
concern for digital adoption as payment propositions that build on the contactless card
experience have a good chance of success. The report has also critically analyzed the pros
and cons of each digital payments method in India.

Last but not the least had concluded in their journal saying that the research on Adoption of
Digital Payment shows that Network Connectivity which plays a vital role when Digital

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Payments are considered. Secondly Ease of Use is also an important factor which determines
the adoption because if the payment mode is complicated, people are less likely to adopt it.
Therefore the company should focus on these parameters and try to make the digital payment
mode more comfortable and easily accessible to the people, so, that they can comfortably
switch to the digital payment mode. Safety and security is the most important parameter as
people pay more attention to the activities where money is involved and avoid taking risks
when the success rate is not 100%. Therefore, companies should maintain the safety level and
keep improving, according to the requirement to maintain the trust. Similarly “Technology”
plays a vital role as the people always like to move the trend, therefore, providing the higher
level of technology will attract the people. So, companies should focus towards introducing
the updated technology with the higher level of security and safety and more users friendly to
make the digital payment mode more suitable and comfortable for the people.

In the journal of R. Pradheep Balaji & Dr. T Vijayakumar S title “Diffusion of Digital
Payment System in Rural India” it gives us the abstract idea about the rural sector in India.
Rural sector in India is home to 66% of the nation's populace which is currently 870 million
individuals. Rural India has noteworthy effect on the financial advancement of the nation,
and with the developing changes of ICT entrance, and users among rural regions will
constitute about portion of all internet users in India in 2020. Considering the advantages like
straightforwardness in exchanges, scope for diminishing parallel economy and enhancing the
simplicity of business, it is exceptionally fundamental that the change towards digital
payment, even in the rural economy is enabled. The research is done as a comparative study
Benefits of digital payment has positive impact on Easy to use factor
Benefits of digital payment has positive impact on Secured Transaction factor
Benefits of digital payment has positive impact on Saves time & Money factor
Influence of digital payment has positive impact on Benefits of digital payment factor.
The report suggests that third-age digital payment framework in the present day fills in as an
appeal as they dealt with the before issues. Today it has turned out to be one of the significant
developments of the 21st century acquiring consistency over the globe. The progress to
a cashless economy has its own particular points of interest and burdens from various
measurements. It is comprehensively broadcasted to get positive improvement and give
extensive variety of advantages to every one of the players in the economy. One of the
essential explanations behind this is to control the course of money as real piece of it is

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charged to be static in nature and stacked through unscrupulous means. The present period is
going into another pace in system of payment by utilizing digital method loaded up with
coupons and offers. In this busy world individuals have no time to relax then paying their
telephones, power bill, insurance, shopping and so on is a tedious work. Digital payment
brings the solution to resolve these issues by paying online instantly rather than standing in
long queues. Individuals are utilizing this application in their cell phones in higher rate thus
completing their works simpler. This research is based on the people in rural areas of South
India that is the major limitation. So it cannot be attributed to other parts of India.
Last but not the least the researcher had concluded by saying that the easiness
and security of transactions and the value of time and money have attracted the rural people
in India and thereby they are more font of digital payment systems.

In the journal article by Aritra Brahma and Rajasi Duttatittle “Cashless Transactions
and Its Impact - A Wise Move Towards Digital India” focuses on the benefits, prospects
and security threats relating to the cashless transactions. It finds that there are several benefits
of going cashless like convenience, easy financial transactions, more availability of discounts,
decreases money and time etc. Different modes are used for doing cashless transactions. The
technology has spread internet banking, mobile banking, prepaid instruments, e-wallets,
mobile wallets, credit and debit cards etc., and at the same time, electronic payments system
is fast growing. It is expected that its impact will be felt in modernization of payment system
in various sectors viz. education, business, economy etc. However, the threat of cyber-attacks
is the red alert which coincides with the evolution of cashless economy. It seems that while
people are getting comfortable with cashless payments, some kind of negative perceptions
like security problems, poor network coverage, and lack of merchant willingness, high
transactional costs, lack of users‘ knowledge on technology etc. are holding back many from
adopting the new system. Though there are some serious threats in the pathway of the
implementation of cashless system, but its actual impact is far far-reaching. It is said that the
country's battle against fake currency is not getting easier and many fakes go undetected. It is
also stated that counterfeiters hitherto had restricted printing facilities which made it easier to
discover fakes. E-payments will be able to check black -An Analysis of Growth Pattern of
Cashless Transaction System. Taking fullest advantage of technology, quick payments and
remittances will ensure optimal use of available funds for banks, financial institutions,
business houses and common citizen of India. The defaults in credit card payments has tried
to analyze the socio-economic profile of the defaulters of credit cards, to identify the set of
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factors which contributed to such defaults and suggest relevant measures to minimize the
default cases. Analysis of reasons indicated that economic hardship is the major reason
identified by majority of the sample units follows by rigid payment structure and loss of
job/business. The main suggestion is that the banks concerned should redesign the payment
structure of credit card defaulters in a flexible and affordable installment. The report also
critically analyses the impact on various sectors like business, education and its impact on
various economic parameters of the country.
The report concludes by stating the negative perceptions are like security problems, poor
network coverage, and lack of merchant willingness, high transactional costs, lack of users
knowledge on technology, defunct POS machines, delayed reimbursement in case of failed
transactions, procedures and financial limits. Convenience in use of cashless transactions and
incentive system are the positive signs for the progress of cashless payments in India. Though
there are some serious threats in the pathway of the implementation of cashless system, but
its actual impact is far far-reaching.

COMPARISON:

The three reports by three different authors on digital payment systems in India have shown
many similarities. One of the common elements we can see in three papers are the fear of
security is the only thing that restricts users to attract to the digital payment systems. The
reports emphasize on the importance of improvements in cashless transactions. It will help in
promoting a new culture of cash transactions and it will be helpful for the nation in terms of
growth and accountability in financial transactions. With the advancement in technology and
the availability of 4G features the digital payment services are expected to be the next big
thing in India.

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Works Cited
Balaji, R. P., & Vijayakumar, T. (2018). Diffusion of Digital Payment System in Rural India.
Global Journal of Management And Business Research.

Brahma, A., & Dutta, R. (2018). Cashless Transactions and Its Impact-A Wise Move
Towards Digital India.

Thenuan, D., Agrawal, A., & Thenuan, P. (2018). ANALYSIS OF ADOPTION OF

DIGITAL PAYMENT AND ITS STIMULUS ON FINANCIAL INCLUSION IN INDIA.
INTERNATIONAL JOURNAL OF SCIENTIFIC RESEARCH, 6(11).