Article Preview
Top1. Introduction
Payment systems are fundamental to the way goods and services are exchanged in an economy. Even prior to the pandemic, the Government of India (GoI) and the Reserve Bank of India (RBI) have been actively engaged in the development of robust digital payment systems and have been encouraging their adoption among the citizens of the country. The RBI has continually provided support, instructions, and launched new payment methods such as the Unified Payment Interface (UPI) to help digital payments move faster. RBI has taken digital payments a step further by enabling small value payments (up to INR 200) through offline mode to enable digital payments where the internet connection may be scarce or not available (The Economic Times, 2022).
The raging COVID-19 pandemic and its effects have been unprecedented. One thing that the pandemic has disrupted is the way the world makes payments for goods and services (Aji et al., 2020). With countries imposing lockdowns to reduce face-to-face interactions among their citizens, the way people conduct day-to-day business has changed, with digital payments playing a key role. The digital payment system provides contactless transactions by allowing users to pay or transfer funds remotely. With the strong demand-side growth, the supply-side i.e. vendors also geared up by deploying digital payment acceptance infrastructures such as QR codes, point-of-sale (POS) devices, and smartphones, among others. Governments have promoted the digital payment system because it is consistent with social distancing norms (De, Pandey, & Pal, 2020). The RBI has encouraged individuals to minimize the usage of cash, which may necessitate going to congested venues to send money and pay bills (The Economics Times, 2020). The COVID-19 pandemic has accelerated digital payment acceptance, which has surged by 27% year on year, with UPI accounting for 51% of total volume (NASSCOM, 2022). As per RBI’s recent bulletin released in February 2022, online transaction volumes from tier 2 and 3 cities on private payment gateway have expanded by 45.6 per cent and 54.3per cent, respectively, in 2021 (The Economic Times, 2022). However, cash is still the dominant form of payment. The RBI data shows that there is still a significant amount of currency in circulation. In the financial year 2021–22, at a level of 31.3 trillion INR, the currency circulation has more than doubled in comparison to 13.4 trillion INR in 2016–17 (TOI Delhi, 09 Nov 2022). As a result, it is pertinent to note that the shift in user behaviour from cash transactions to digital payment systems is not seamless and frictionless.
Digital payment systems have design-level barriers such as the required infrastructure on the demand side such as smartphones, internet, etc. (Sobti, 2019) and supply-side such as digital acceptance infrastructure, customer education or a higher cognitive load (Shankar et al., 2020), and trust in the payment system (P. Patil et al., 2020) among others. Accordingly, while accessibility and availability of a payment system are necessary conditions for its adoption, they are not sufficient ones. Although Indian digital payment systems are largely accessible and available for banked and unbanked citizens of the country, there is a need to explore what are the factors that aid sustained adoption of digital payments; what are the barriers to entry, and how well the digital payment methods mitigate those barriers. This may become the basis for policymakers taking targeted action to address them for sustained adoption and usage of digital payment methods in India.
The remaining sections of this paper are organised as follows: Section 2 presents an overview of existing literature on the adoption of new technology; section 3 elaborates on the research methodology, and Section 4 presents the data analysis. In the penultimate Section 5, findings and discussion are presented. Finally, Section 6 provides a conclusion, limitations, and scope for future work.