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There is a general sense of reluctance when it comes to electronic payments in the plains of offline retail in India.

Merchants aren’t interested in accepting them, banks aren’t interested in convincing any other than the biggest merchants to accept card payments and most users are not interested in using digital payments for most things.

The government, eager to drive cashless payments, has tried everything. Slashed the fee merchants had to pay banks for accepting payments, gave banks targets to hook more merchants with point of sale terminals to accept digital payments and is looking at pushing low-cost solution like QR codes.

But all of this becomes a Sisyphean task, because of fundamentally misaligned incentives for all stakeholders in the digital payments system. But what if merchants who today are pushed and prodded to accept digital payments actually want to accept digital payments?

And that starts with fixing the card payments before we get to pushing something like the payments poster child UPI (short for Unified Payments Interface, a real-time mobile payments system).


In Jan 2019, UPI hit a record 672.75 million transactions. The National Payments Corporation of India, which manages UPI, doesn’t split the data, but let’s assume that half of these volumes are made from individuals to merchants. And more than 90% of these merchant payments are online—for recharges, bill payments, e-commerce, etc.

The vast majority of commerce is still offline—and cash-heavy

Zoom out a bit here. More than 95% of commerce in India is still offline, and the picture is quite different there. It is cash-heavy and limited by point of sale (PoS) devices present only in the large cities.

You may ask why bother about card-based PoS payments instead of faster, better, and cheaper (UPI-based) QR-code solutions that consumers scan with a smartphone. Aren’t they an obvious solution to reaching consumers and merchants at scale? Not so fast.

The real picture is sobering. Of India’s 390 million Internet users, about 160 million transact online, said a recent report by Google, Omidyar Network and Bain & Company. More importantly, 54 million of the 160 million stopped transacting online after their first purchase—presumably because of a poor interface and other challenges.

Add to this the fact that the average user already has 51 apps on their phone. For QR code solutions to work at scale, consumers will need a compelling enough reason and relevance to download that 52nd app. Not to mention having a stable enough connection to complete the payment instantly at the point of sale. Both of which are optimistic, at best. It’s perhaps more realistic to persuade a consumer to pull out a piece of plastic that they already use at an ATM and present it to the merchant.


Srikanth Rajagopalan

Srikanth has been in the payments, e-commerce, and technology industries for over two decades. He has launched and scaled payments businesses both in large organisations and startups. When not questioning status quo in these industries, Srikanth spends time trying to find the correlation between jazz music and quantum physics.

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