In contrast to the gloom cast by the Covid-19 pandemic and lockdown across the economy, digital payments and fintech was one sector, which witnessed record highs in 2020 as a large number of people preferred to stay at home and maintain social distancing.

With concerns over contracting novel coronavirus infection from visiting bank branches and using currency notes, many people — not only in metros but also in smaller towns — have started using their smartphones for making payments and even taking loans for smooth banking services.

Digital payments touched a record high in 2020 with all channels from the Unified Payments Interface to the Aadhar-enabled Payment System (AePS) registering stellar growth.


After crossing the 200-crore mark in October, UPI transactions touched a record high at 221 crore transactions worth ₹3.9-lakh crore in November.

For 2020-21, the Centre has set a target of ₹4,630 crore for digital payments, which — players are hopeful — is likely to be exceeded.

“While it was demonetisation in 2016 that had sparked the initial take-off of digital payments in India, government’s efforts over a period of time have kept the momentum going. The global pandemic has fuelled tremendous and large scale adoption of digital payments and digital commerce in India – right from metros to even tier 4 and 5 cities,” said Manish Patel, Founder and CEO, Mswipe.

At Mswipe, contactless payments have grown from 13 per cent of total transactions in January 2020 to 30 per cent of total transactions in December 2020.

Banks and digital channels

The pandemic also forced traditional banks to depend more heavily on their digital channels to reach out to and facilitate customers and most banks have reported a sharp increase in usage of their mobile and digital banking channels.

New and innovative means such as video KYC and WhatsApp banking have been initiated by banks and have been widely adapted by customers.

Monthly data reflects this widespread adoption of digital channels with a sharp rise. According to Reserve Bank of India data, mobile app based payments touched 20,919.08 crore in September this year amounting to Rs 7,04,109 crore while payments through netbanking stood at 28.22 crore transactions worth Rs 34,36,124 crore.

Share of challenges

However, the growth has been tempered by challenges as well. On December 23, the RBI once again cautioned against unauthorised digital lending platforms and mobile apps on promises of getting loans in quick and hassle-free manner.

Harassment by loan recovery agents of at least some of these players has been a key complaint for many small borrowers. Industry bodies such as Digital Lenders Association of India and FinTech Association for Consumer Empowerment are working on better self regulation.

Outages in digital services of HDFC Bank and State Bank of India’s YONO app also highlighted the need for better infrastructure. RBI Governor Shaktikanta Das also urged banks to invest proactively in technology.

Payment companies have also been hoping that the government will revisit the issue of zero MDR as they believe that this will act as a disincentive to industry.

Bright outlook

Needless to say, the outlook for the sector remains bright in 2021 with expectation of further adoption of digital payments and use of digital banking services by consumers.

Bankers say branch banking will continue but they expect more digital engagement with customers.

A recent report by Accenture said that in India, 6,660 crore transactions worth $270.7 billion are expected to shift from cash to cards and digital payments by 2023 – and increase to $856.6 billion by 2030.

Payment players also expect more growth and are looking to scale up further next year with initiatives like the new umbrella entity for retail payments likely to take shape.

The RBI’s decision to hike the limit for contactless card transactions to ₹5,000 and the entry of popular messaging service WhatsApp into the payments sector, though in a graded manner, is expected to further fuel growth. Concerns over the security and safety of digital payments are likely to be addressed by the proposed Reserve Bank of India (Digital Payment Security Controls) Directions for regulated entities.