PayU Payment Gateway: From stalls to supermarkets, India's QR codes show the future of payments

MUMBAI: In India, when you stroll through a street-side vegetable stall, you may notice a small sign placed among the fresh vegetables with a QR code on it.

These QR codes enable real-time digital payments, signalling a rapid financial transformation in the world's most populous country.

Last October, the Unified Payments Interface (UPI), which is backed by the Government of India, processed a staggering 11.4 crore transactions, a year-on-year growth of 561 TP3T.

This system is the backbone of India's so-called Digital Public Infrastructure, complementing the extensive Aadhaar identification programme (over 140 million people are enrolled) and nationwide digital data exchange.

Economical smartphones and ultra-low-cost data are driving this payments revolution, with about 1.2 billion mobile phone users nationwide.

The combination of smartphones and digital payments has enabled millions of small traders to conduct cashless transactions.

Proponents of the system claim that it also provides wider access to financial services for a large number of micro-merchants in India.

The National Payments Corporation of India (NPCI), an umbrella organisation set up by the Reserve Bank of India and the Association of Banks in India, operates a vast electronic payment and settlement system.

By the end of last year, NPCI estimated that it processed more than 451 TP3T of monthly real-time transactions globally.

The programme to improve banking services for low-income people is another pillar of this change.

The Indian government claims to have opened more than 460 million new bank accounts for the poor in the last decade.

This allows benefit payments to be distributed directly to citizens, reducing opportunities for corruption at the local government level and providing a new way of delivering services.

Nalin Mehta, author of India's Technological Age, tracks India's digital revolution, noting that these changes have led to "a new kind of welfare state based on digital direct benefit transfers and interconnected e-governance systems".

Mehta said that new digital public goods have had a profound impact on society, politics and culture.

He said that Digital India has changed the basic structure of society, politics, the relationship between the government and every Indian, and the very nature of the country.

Mehta describes these innovations as having a "profound impact" on the rest of the world and the future of global technology.

India has emerged as a global technology provider. The country's exports of IT and business process outsourcing (BPO) services reached $194 billion in FY 2022-23, according to Nasscom, a top IT industry organisation. A recent government survey revealed that 5.21 TP3T of young people aged 15-29 years living in urban areas are able to write computer programmes using specialised programming languages.

India is now encouraging other developing countries to follow its digital transformation and is providing assistance for its massive digital infrastructure through its subsidiary NPCI International.

Nepal and Bhutan have been using this payment system since 2022.

According to Mehta, 43 countries have expressed interest.

Ritesh Shukla, CEO of NPCI International, said that India's digital transformation is shaping a new model of economic development that is sometimes seen as an alternative to the Western and Chinese models.

Shukla says, "So far, people have usually associated the two models together."

"In India, we have a very Western model of development, very capitalist-driven, urban-centric, moving people to cities, creating manufacturing units, creating jobs."

"The other is the communist model, and I believe we've created a very unique model that relies heavily on new technology."

The dissemination of such technological capabilities may enhance India's economy and influence, especially in developing countries.

When Prime Minister Modi met President Biden in Washington in June, their joint statement emphasised the need for "global digital inclusiveness" and noted that the two countries would provide global leadership in digital public infrastructure.

Mehta said the digital system has become "an important symbol of India's soft power".

The Economist even describes the plan to export digital knowledge as "India's low-cost, software-based alternative to China's infrastructure-led 'One Belt, One Road' initiative" (China's QR code apps have facilitated micropayments on the mainland, and Beijing's aid to the Beijing's assistance to Pacific Island countries also includes digital technologies, such as Fiji's e-government infrastructure).

Critics of the Indian approach have reservations. Some question whether a government-controlled system can attract sufficient future investment and foster cutting-edge innovation.

However, a World Bank report released last September praised the approach, saying it had achieved financial inclusion for the country in six years, which otherwise could have taken nearly half a century.

Modi has described the rapid expansion of the system as a national achievement that has attracted global attention.

During India's G20 presidency in 2023, Modi highlighted the country's digital achievements.

"In India, digitisation has brought about revolutionary changes," Modi said at the G20 ministerial meeting in September.

Technology was being used as a tool to empower people, make data easily accessible and ensure inclusiveness. India was willing to share its experience with partner countries.