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DIGITAL PAYMENTS: Important milestones in the development of the payments system include:

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Published: 24th Oct, 2019

DIGITAL PAYMENTS: Important milestones in the development of the payments system include:
  • Introduction of MICR clearing in the early 1980s. It is online image-based cheque clearing system where cheque images and magnetic ink character recognition (MICR) data are captured at the collecting bank branch and transmitted electronically.
  • Electronic Clearing Service and Electronic Funds Transfer in the 1990s.
  • Issuance of credit and debit cards by banks in the 1990s.
  • National Financial Switch in 2003 that brought about interconnectivity of ATMs across the country.
  • RTGS and NEFT in 2004.
  • Cheque Truncation System (CTS) in 2008. Cheque Truncation System (CTS) or Image-based Clearing System (ICS) is for faster clearing of cheques. Cheque truncation means stopping the flow of the physical cheques issued by a drawer to the drawee branch.
  • 'Card not present' transaction in 2009. It is most commonly used for payments made over Internet, but also mail-order transactions by mail or fax, or over the telephone.
  • New RTGS with enhanced features in 2013 that required banks to adopt ISO 20022 standard messaging formats. The objective of introducing ISO 20022 standard message format for payment system is to bring about standardisation in the messaging formats for various payment systems in the country and to conform to international standard.
  • Non-bank entities have been introduced in the issuance of pre-paid instruments (PPI), including mobile and digital wallets. BHIM (Bharat Interface for Money) is a mobile payment App developed by the National Payments Corporation of India (NPCI), based on the Unified Payments Interface (UPI).
  • These developments capture the evolution of the Digital Payments ecosystem in the country. It resulted in setting up Committee of Digital Payments in 2016 under the Chairmanship of Shri. Ratan P. Watal, Principal Adviser, NITI Aayog.

Major Trends in Digital Payment (2016-17 and 2017-18)

  • The demonetization of specified bank notes in early November 2016 along with other measures announced by the Government and the RBI to promote the movement from cash to non-cash modes of transactions impacted the volume and value of payments systems.
  • The year-on-year (y-o-y) growth of digital payments in 2017-18 was of the order of 44.6% which was nearly double the CAGR growth in volume for the period 2011-2016.
  • Transactions relating to IMPS, PPI and Debit card had exhibited growth rates in triple digits in the year 2016-17. This growth trend however has slowed down in 2017-18 and all these instruments exhibited double digit growth.
  • UPI however has grown multi-fold in the year 2017-18 and touched 915.2 mn transaction in 2017-18. This instrument had minimal presence in year 2016-17.
  • The volume of paper clearing had been persistently showing negative growth throughout the year 2017-18 compared to the positive growth in 2016-17.
  • NEFT volumes had showed an impressive increase in 2016-17. It continued to grow in 2017-18 albeit a slower pace.

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