The Rise of Digital Payments in India and the Role of AI
In India, the shift from cash to digital payments has been remarkable over the past decade. A KPMG analysis reveals that the number of merchants accepting digital payment methods has skyrocketed from 1.5 million in 2016–17 to over 10 million in just two to three years. It is projected that digital payments will account for 71.7 percent of all payments by 2025.
There are several key factors responsible for the growth of digital payments in India. First, the simple onboarding process and ease of use provided by payment gateways have made it effortless for businesses to accept electronic payments. Second, increased awareness among consumers has played a significant role in the adoption of digital payments. Demonetization and the COVID-19 pandemic accelerated the spread of electronic payments, leading to over 80 million adults in India making their first digital merchant payment.
Third, the widespread use of smartphones and the expansion of internet connectivity have been crucial factors. India has the second-largest digital population globally, driven by a rapid increase in smartphone usage. With the projected rise of 1 billion smartphone users by 2026, fuelled by rural areas, online communication has become faster and more accessible.
Fourth, government policies such as Cashless India have aimed to empower the nation digitally and foster a cashless society. The Reserve Bank of India (RBI) regularly introduces policies and rules to promote digital payments and support the development of technology and payment infrastructure.
One of the reasons digital payments have gained traction is their speed, convenience, and availability. Compared to traditional payment systems, digital payments are quick and integrate seamlessly with e-commerce transactions. The incorporation of AI in the payment industry has become necessary as the demand for digital payments continues to grow. By leveraging AI, businesses can gain valuable insights into customer behaviours, detect fraud, and make faster and more accurate data-driven decisions.
AI has various applications in digital payments. First, it plays a vital role in fraud detection and prevention. AI can analyse user behaviour patterns to create unique profiles for each user, allowing it to identify unusual activity and flag it for review.
Second, AI brings increased automation to the payment sector, improving efficiency and eliminating human errors. Machine learning algorithms can accelerate transaction authorization and monitoring, streamlining the payment process. AI-powered automated payment processing reduces manual efforts and enhances overall efficiency.
Third, AI significantly enhances the customer experience in the financial industry and the digital payments sector. Chatbots powered by AI and natural language processing technology provide highly automated and customized services, disrupting traditional service businesses.
In conclusion, AI is revolutionizing the digital payment industry in India. AI-powered solutions streamline and secure the payment process, reduce fraud, and enhance the customer experience. As technology continues to evolve, advanced AI-powered solutions will emerge, making payments more secure, convenient, and efficient for all stakeholders involved.
