Sari shops and street food stalls: How e-payments have taken India by storm

Sari shops and street food stalls: How e-payments have taken India by storm

Indian weddings are notoriously elaborate affairs, requiring many changes of clothing for several days of celebration.

It used to be common for a family visiting Brij Kishore Agarwal’s sari shop, near the narrow lanes of Chandni Chowk market in India’s Old Delhi, to leave with a large pile of brightly embroidered clothes and leave with a large pile of cash.

Worries that someone would break in and steal the money before he could make a bank deposit kept the now 79-year-old store owner awake at night.

Today he sleeps easier, because almost all of his customers use e-payments to complete their purchases.

“I’ve seen the country change,” said Agarwal, who has worked at the store for about 65 years. “We very rarely get paid in cash.”

Digital payments, made through systems such as the Unified Payments Interface (UPI), which allow users to transfer funds instantly by scanning a QR code, have become widespread across the world’s most populous countries, transforming everyday life.

In Delhi, tea vendors collect rupees through mobile apps, and tuk tuk drivers who stop to buy parathas stuffed with steaming hot paneer pay with their phones.

The e-payments revolution is also likely to play a key role in India’s attempt to become an economic powerhouse. It is the fifth largest economy on the planet, and Prime Minister Narendra Modi, now running for a third consecutive term, has said he wants India to be considered “developed” by 2047.

“Digital payments are likely to boost India’s growth by eliminating friction, increasing efficiency, and reducing costs,” Eswar Prasad, an economics professor at Cornell University, told CNN. “UPI and wider digitization of the economy can also increase the inclusiveness of this growth,” he added.

Digital India
India’s push to digitize its society began about 15 years ago, but e-payments were slow to catch on. In 2016, 96% of transactions in India were still conducted with paper money.

Two events that year changed things. First, the non-profit National Payments Corporation of India (NPCI), an initiative of the central bank and banking association, launched the UPI payments infrastructure.

UPI allows users to use their phone as a virtual debit card, transferring money from nearly 600 member banks and fintech companies instantly without entering bank details or paying transaction fees.

Later that year, the government suddenly canceled two large banknotes that accounted for 86% of all currency in circulation, with the stated aim of fighting corruption. That prompted a surge in the use of e-payments.

“We have no choice,” said Ramesh Kumar, 52, owner of a towel shop in Delhi’s Sarojini Nagar Market, which started accepting digital payments in 2016.

Covid-19 has further increased the use of digital transactions, as people try to protect themselves from the virus.

Now, Indians use UPI to pay everyone from greengrocers to doctors. More digital transactions are completed in India than any other country, according to the government. In 2023, the number of UPI transactions will exceed 100 billion.

There are some holds. Azeez, a 34-year-old rickshaw driver in Old Delhi, told CNN that he was too afraid of losing money to use e-payments.

“I’m uneducated, I’m poor, I’ve never been to school, I can’t read or write,” he said. “What if I make a mistake?”

However, the upward trend is expected to continue, further increasing the amount and value of funds flowing into the formal economy. UPI targets two billion transactions per day by 2030.

“If I can, and my shop, which is so old, can move forward and change like this, I’m sure every buyer and customer will too,” said Agarwal, a sari seller.

‘A stake in India’s economic growth’
India is the world’s fastest-growing major economy and digitization “has played quite an important role in the very successful economic trajectory that India has been on,” said Prasad, who is the author of “The Future of Money: How the Digital Revolution is Changing. Currency and Finance.” ”

While it is difficult to quantify the impact that UPI adoption has had on India’s gross domestic product, at the micro level it is easy to see how it has made a difference. Agarwal says it has improved efficiency and transparency for his business, and made filing taxes easier.

Kapil Sharma, 42, who sells flowers for as little as $0.12 outside a temple in Old Delhi, told CNN he once lost business because potential customers didn’t want to wait for change. He started using UPI about a year ago and has seen an increase in sales.

“It’s easier,” he said. “They buy, pay and leave.”

Apart from convenience, India’s digital public infrastructure has helped it achieve an 80% financial inclusion rate. While inequality remains a problem, Prasad says that digitization has “made Indians, including the less affluent, feel that they have a stake in the growth and transformation of India’s economy.”

Now NPCI is focusing on expanding overseas to make it easier for citizens working abroad to send remittances home or allow Indian travelers to pay using UPI. This year, the Eiffel Tower website started accepting payments through UPI.

“I think the government sees UPI as a template for the rest of the world,” Prasad said. “I think it will definitely help India’s position on the world stage.”

Regardless of its future impact outside India, UPI appears to have strong grassroots support from those who have benefited from it, which means its dominance in the South Asian country is likely to grow.

“If anyone gives me the option to go back to cash payments, I’ll just say I’m not interested,” Agarwal said. “Please find the phone, download this app and use it.”