Transactional transformation
India’s scan-and-pay system now ubiquitous, extending banking services to millions
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 women weavers, sticking out of a mound of 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 homegrown digital network that has made business easier and brought large numbers of Indians into the formal economy.
The scan-and-pay system is one pillar of what the country’s prime minister, Narendra Modi, has championed as “digital public infrastructure,” with a foundation laid by the government. It has made daily life more convenient, expanded banking services like credit and savings to millions more Indians,
and extended the reach of government programs and tax collection.
With this network, India has shown on a previously unseen scale how rapid technological innovation can have a leapfrog effect for developing nations, spurring economic growth even as physical infrastructure lags. 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.
“Our digital payments ecosystem has been developed as a free public good,” Modi told finance ministers from the Group of 20, which India is hosting this year. “This has radically transformed governance, financial inclusion and ease of living in India.”
In simple terms, 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 robust campaign to deliver every citizen a unique identification number, called the Aadhaar. The initiative, begun in 2009 under Modi’s predecessor, Manmohan Singh, was pushed forward by Modi after overcoming years of legal challenges over privacy concerns.
The government says about 99% of adults now have a biometric identification number, with more than 1.3 billion IDs issued in all.
Nandan Nilekani, a co-founder of the information technology giant Infosys who has been involved in India’s digital identification efforts since their early days, said the country could make a technological leap because it had little legacy digital infrastructure in place. “India was able to develop afresh with a clean slate,” he said.
The IDs ease the creation of bank accounts and are the foundation of the instant payment system, known as the Unified Payments Interface. The platform, an initiative of India’s central bank that is run by a nonprofit organization, offers services from hundreds of banks and dozens of mobile payment apps, with no transaction fees.
In January, about 8 billion transactions worth nearly $200 billion were carried out on the UPI, according to Dilip Asbe, the managing director of the National Payments Corp. of India, which oversees the platform.
The system has grown rapidly and is now used by close to 300 million individuals and 50 million merchants, Asbe said, for even the smallest of transactions, with nearly 50% classified as small or micro payments.