RBI launches 'Digital Payments Index'​ to track transaction

On 1 January, the Reserve Bank of India (RBI) has constructed a composite, Digital Payments Index (DPI) to capture the extent of digitisation of payments across the country. This is a significant development given the sharp pick-up in digital transactions seen in the recent past.

The Indian fintech app space is all too crowded, and there is no clear winner so far even among the top players. Each of these parameters has sub-parameters which, in turn, consist of various measurable indicators, the central bank added.

In India, AmazonPay, Paytm , GooglePay and PhonePe are trying to evolve into super-apps by providing a bouquet of payment solutions , bill payment, insurance, loans and gold loans and investment features. Going forward, RBI-DPI shall be published on RBI's website on a semi-annual basis from March 2021 onwards with a lag of 4 months.

However, no company has equal expertise and penetration across all segments. For instance, Amazon specialises in e-commerce, bill payments and other payments solutions. Paytm is spread across payments, bill payments, investments, shopping and gaming. PhonePe offers a similar range of offerings. Plus, there are a few telcos who are building several fintech and entertainment solutions.

WhatsApp is taking baby steps in terms of service range and will initially offer affordable health insurance plans from SBI General Insurance. It is also planning to provide micro-pension products (small amounts of money individually saved and invested collectively) and has tied up with HDFC Pension Management and pinBox, a digital micro-pension company, to offer retirement plans. WhatsApp has partnered with HDFC Bank and ICICI Bank, among others, enabling them to send automated text messages to customers as a B2C communication service. The company also works with JioMart to collate online grocery orders.

WhatsApp already has a vast user base, one of the primary requirements of a super-app. With its 400 Mn Indian users ,WhatsApp is focusing on being a discovery and payment platform instead of providing traditional fintech products .

The RBI-DPI comprises five broad parameters that enable the measurement of deepening and penetration of digital payments in the country over different time periods. These parameters are :

Payment Enablers (25%),

Payment Infrastructure – Demand-side factors (10%),

Payment Infrastructure – Supply-side factors (15%),

Payment Performance(45%) and

Consumer Centricity (5%).

DPI score for March 2018 is set at 100. The DPI for March 2019 and March 2020 work out to 153.47 and 207.84 respectively, indicating appreciable growth. Going forward, RBI-DPI will be published on the RBI’s website on a semi-annual basis from March 2021 onwards with a lag of four months, the central bank said. In February this year, the RBI had first announced the plan to launch the DPI.

The RBI and Government of India have been pushing for digital transactions over the years to bring in more transparency and efficiency in the financial system. In that sense, the launch of DPI is a significant step.

According to the latest RBI data, digital transactions exhibited a sustained recovery and momentum picked up in November 2020, supported by both wholesale and retail transactions.

In the retail segment, national electronic funds transfer (NEFT) transactions volume grew 24.6 percent y-o-y in November 2020, much higher than the growth (13.9 percent) recorded a month ago. The growth in the value of NEFT transactions in November 2020 (27.9 percent) was higher than that recorded in October 2020 (20.1 percent), the RBI data showed.