India has a huge potential for digital payments. As of October 2021, the country had around 1.18 billion mobile connections, 700 million Internet users, and about 600 million smartphones. These numbers are growing rapidly each quarter. With about 25.5 billion real-time payment transactions, India ranked first in the world in terms of the number of transactions in 2020.

In 1996, Industrial Credit and Investment Corporation of India (ICICI) introduced online banking services in India, by using electronic banking at its branches. Later in 1999, banks such as HDFC, IndusInd, and Citi launched online banking facilities. The trend continued to grow with increasingly more banks launching net banking services in India. This marked the beginning of the digital transactions era in India – several new banks started offering services to users.

In 2008, the National Payments Corporation of India (NPCI) started its journey. It was formed by the Reserve Bank of India (RBI) and Indian Banks’ Association (IBA) in order to create a robust payment and settlement infrastructure in India. Since then, it has launched several products such as Aadhaar Enabled Payments System, Bharat Bill Payments System (BBPS), BHIM, and Cheque Transaction System.

Newer models are emerging rapidly; currently, there are around 10 different types of digital payment methods in India. These include:

• Banking Card – This was launched by the Central Bank of India in India in 1980, in the form of the first credit card. MasterCard was introduced in 1988, and until 1993, several PSU banks started issuing credit cards.
• Unstructured Supplementary Service Data (USSD) – The USSD functionality was launched in 2016. This is a mobile banking facility enabling users to use mobile banking without smartphones or an Internet connection.
• Aadhaar Enabled Payment Systems (AEPS) – This is a bank-led model which allows online interoperable financial inclusion transactions at point-of-sale (PoS) through the business correspondent of any bank using the Aadhaar authentication.
• Unified Payments Interface (UPI) – UPI was developed by NPCI in 2016; it facilitates peer-to-peer, person-to-merchant transactions.
• Mobile Wallet – This is a virtual wallet that stores payment card information on a mobile device.
• Bank Pre-Paid Card – Under the motto “Pay Now, Use Later,” the pre-paid cards allow users to buy things with funds available in their cards.
• Point of Sale – Point of Sale (PoS) is a technological instrument provided by a Merchant Establishment (ME) to carry out the sale of goods or services to customers in a cashless environment.
• Internet Banking – This is an online banking method that enables customers of a bank or financial institution to carry out transactions through a portal.
• Mobile Banking – This is a service provided by banks and financial institutions to carry out financial transactions through a mobile device.
• Micro ATM – These are portable devices allowing banking transactions through card swipe machines.

In order to transform India into a digitally empowered society and knowledge economy, the Government of India launched Digital India programme in 2015. The programme focuses on three main vision areas: digital infrastructure as a core utility to every citizen, governance and services on demand, and digital empowerment of citizens. Through the programme, the government wants to ensure the availability of high-speed Internet, provide mobile phones and bank accounts to every citizen, ensure availability of services in real-time from online and mobile platforms, make financial transactions electronic and cashless, and ensure digital literacy and availability of digital resources across the country.