Digital Payments Transform Indian Commerce
The little QR code is ubiquitous across India’s vastness.
You find it pasted on a tree next to a roadside barber, propped on the pile of embroidery sold by weavers, sticking out of a mound of roasted peanuts on a snack cart.
The codes connect hundreds of millions of people in an instant payment system that has revolutionized Indian commerce. Billions of mobile app transactions — a volume dwarfing anything in the West — course each month through a digital network that has made business easier and brought large numbers of Indians into the formal economy.
The scan-and-pay system is a pillar of what the prime minister, Narendra Modi, has championed as “digital public infrastructure.” It has expanded banking services to millions more Indians, and extended the reach of government programs and tax collection.
India has shown how rapid technological innovation in developing nations can spur economic growth. It is a public-private model that India wants to export as it fashions itself as an incubator of ideas that can lift up the world’s poorer nations.
Indian officials describe the digital infrastructure as a set of “rail tracks,” laid by the government, on top of which innovation can happen at low cost.
At its heart has been a campaign to deliver every citizen a unique identification number. The initiative, begun in 2009 under Mr. Modi’s predecessor, Manmohan Singh, was pushed forward by Mr. Modi after overcoming years of legal challenges over privacy concerns.
The government says about 99 percent of adults now have a biometric identification number, with more than 1.3 billion IDs issued in all. The IDs are the foundation of the instant payment system, known as the Unified Payments Interface. The platform offers services from hundreds of banks and dozens of mobile payment apps, with no transaction fees.
In January, about eight billion transactions worth nearly $200 billion were carried out on the U.P.I., according to Dilip Asbe, the managing director of the National Payments Corporation of India, which oversees the platform.
The system is now used by close to 300 million individuals and 50 million merchants, Mr. Asbe said. Digital payments are being made for even the smallest transactions, with nearly 50 percent classified as small or micro payments: 10 cents for a cup of milk chai or $2 for a bag of fresh vegetables. That is a significant behavioral shift in what has long been a cash-driven economy.
One impetus for the move away from cash was Mr. Modi’s 2016 decision to remove all large-denomination currency from the market. Promoted as an effort to eradicate black money in politics, the shock devastated small businesses that ran on cash.
Reliance on the digital infrastructure deepened during the pandemic, as the government used the ID numbers to manage the vaccination drive and deliver financial aid.
The concerns over data privacy have not fully receded, even after Supreme Court rulings governing its use. Some worry that the erosion of checks on government power under Mr. Modi could open the door to abuses of the central identity database. With India pushing its model abroad, including in countries lacking strong legal safeguards, these concerns will follow.
In two dozen interviews, a varied picture of digital payments emerged. In a pair of village shops in the northern state of Uttar Pradesh, they made up about 10 percent of sales; in the busier markets of Delhi, that number could be a quarter or half.
Before the pandemic, Rajesh Kumar Srivastva pasted a QR code on the inside of his rickshaw in Delhi, but since only a quarter of his payments were digital, they remained an afterthought. When large bills depleted his cash, his wife urged him to check the account.
Unable to figure out his balance at an A.T.M., he returned with his daughter, a 20-yearold civil engineering student. First, she withdrew 5,000 rupees, roughly $60.
“She checked again, and said, ‘Papa, there is 45,000 more left,’ ” Mr. Srivastva said. “I loved it!”