Instant digital payments are revolutionizing commerce in India

The tiny QR code is everywhere in vast parts of India.

In a tree near a roadside barber, you can see knitters leaning against piles of embroidery for sale, sticking out of mounds of freshly roasted peanuts from a food cart. A performer on a beach in Bombay puts his tip in a jar before starting his robot performance; A beggar in New Delhi shows you money through your car window when you say you don’t have it.

Codes connect millions of people through instant payment system that has revolutionized Indian commerce. Billions of mobile app transactions — dwarfing any in the West — flow through the domestic digital network every month, which has eased business and brought large numbers of Indians into the formal economy.

The scan-and-pay system is a key component of what Prime Minister Narendra Modi has promoted as “digital public infrastructure”, the foundation of which has been laid by the government. It has made daily life more convenient, extended banking services like credit and savings to millions of Indians, and expanded government schemes and tax collection.

Through this network, India has shown like never before how rapidly technological innovation can advance developing countries, generating economic growth even when physical infrastructure is lagging behind. It is the public-private model that India wants to export as it presents itself as a repository of ideas that can improve the world’s poorest countries.

“Our digital payments environment has been created as a free public good,” Modi told finance ministers at the Group of 20, which India hosts this year, in late February. “It has radically changed governance, financial inclusion and ease of living in India.”

In simple terms, Indian officials describe digital infrastructure as “railroads” set up by the government on which innovation can be done at low cost.

In essence, a massive campaign to provide every citizen with a unique identification number called Aadhaar. Launched by Modi’s predecessor Manmohan Singh in 2009, the initiative came after Modi overcame years of legal challenges over privacy concerns.

About 99 percent of adults now have a biometric ID number, with more than 1.3 billion IDs issued in total, the government says.

Nandan Nilekani, one of the co-founders of IT firm Infosys, who has been involved in India’s digital IT initiatives since its inception, said the country’s existing digital infrastructure is limited and technologically advanced. “With a blank slate, India has been able to grow again,” he said.

IDs facilitated the creation of bank accounts and were the foundation of an instant payment system known as the Unified Payment Interface (IPU). An initiative of the Central Bank of India and operated by a non-profit organization, the platform offers services from hundreds of banks and dozens of mobile payment apps without transaction fees.

In January, about $8 billion worth of transactions worth about $200 billion were made on IPU, said Dilip Aspey, managing director of the National Payments Corporation of India, which oversees the platform.

Last year the value of instant digital transactions exceeded the US, UK, Germany and France. “Combine all four and multiply by four, it’s more than that,” Indian government minister Ashwini Vaishnav told the World Economic Forum in January.

Asbe says the system is growing rapidly and is currently used by about 300 million individuals and 50 million merchants. Digital payments are made even for small transactions, about 50 percent of which are classified as small or micropayments: 10 cents for a cup of chai milk or two dollars for a bag of fresh vegetables. This is a significant behavioral change in what has long been a cash-driven economy.

Modi’s decision to remove all large-denomination coins from the market in 2016 is a move away from cash and promoting digital payments. Advertised as an effort to eliminate ill-gotten gains in politics, the impact hit cash-strapped small businesses.

Reliance on digital infrastructure has deepened during the pandemic as the government used numbers from IDs to manage and fund the world’s largest vaccination campaign.

As the system has become integrated into the country’s life, even after Supreme Court rulings regulating its use, the concern for data privacy has not been completely forgotten. Some worry that the sharp erosion of checks on government power under Modi could open the door to abuses of the central identity database. If India pushes its model abroad, even in countries without strong legal protections, these concerns will emerge.

Amitabh Kant, one of the main Indian coordinators of the Group of 20 events, said the government had found the right balance between privacy and innovation. “We have said that the data belongs to the individual and the individual has the right to consent to every transaction they make,” he said.

Over two dozen interviews in various cities, towns and cities revealed a mixed picture of digital payments. For a couple of shops in cities in the northern state of Uttar Pradesh, about 10 percent of daily sales; In New Delhi’s bustling markets, that figure could be a quarter or a half.

Even in sectors that have yet to accept digital payments, such as the fishing industry in the southern state of Kerala, the basic building blocks of digital infrastructure such as identity numbers, bank accounts and mobile phone apps have made it easier to deliver services.

In digital payment markets, the genuine enthusiasm of newcomers to the system is palpable. Apps companies are working to ensure that digital literacy is facilitated for a wide range of applications. Traders on the same corridor help each other. And, since we’re talking about technology, kids are helping parents.

Small voice players provided by payment apps are common at food carts and tea shops, where vendors are too busy to check phone messages after every small transaction. A Siri-like voice will instantly tell you how much money has been received with each QR code payment. This has helped to overcome distrust among traders who have long been accustomed to cash transactions.

Traders like a cobbler and an ice cream vendor in a market in central New Delhi who don’t have their own QR codes borrow from their neighbors. This is the digital version: I have no change, but will settle with the help of my neighbors.

Rajesh Kumar Srivastva, a motorcycle taxi driver in New Delhi, says, “I prioritize money. “But I saw the benefits of this during the lockdown.”

Before the pandemic, Srivathwa had a QR code pasted on her insides RickshawBut since only a quarter of his payments were digital, he didn’t give them much thought.

Just before the 2020 lockdown, Srivastva paid off a huge electricity bill and two installments on his car loan, drawing down cash on the house.

Their cash income is often insufficient to justify trips in search of bank deposits. But his wife insisted him to verify the account linked to the digital remittance. She went with her daughter, a 20-year-old civil engineering student, as she did not know how to check her balance at the ATM.

First, her daughter took 5,000 rupees, about $60.

“He checked again and said: ‘Dad, 45,000 more to go,” Srivatva said before flashing a big smile. “I loved!”.

Mujib Mashal is the South Asia Bureau Chief of The New York Times. Born in Kabul, he wrote for magazines before joining The Atlantic, Harper’s, Time and The Times. @mujmash

Hari Kumar is a correspondent in the New Delhi bureau. He joined The Times in 1997. @HarryNYT