This was published 7 months ago
From stall to supermarket, India’s QR codes show the future of payments
By Matt Wade
Mumbai: If you go to a street-side vegetable stall in India, there’s likely to be a small sign with a QR code nestled among the fresh produce.
Those codes, which allow real-time digital payments, are part of a lightning-fast financial transformation playing out in the world’s most populous nation.
A grocery store displays a QR code for digital payments in Bengaluru, India.Credit: Bloomberg
In October, the government-backed payments system, the Unified Payments Interface, processed a staggering 11.4 billion transactions, up 56 per cent in a year.
The system is one pillar of what India calls its digital public infrastructure, along with a vast personal identification scheme (most of its 1.4 billion people are registered) and a nationwide digital data exchange.
Low-cost mobile phones and ultra-cheap data have helped facilitate the payment revolution; the country has about 1.2 billion mobile phone subscribers. And the combination of smartphones and digital payments has allowed millions of small vendors to trade without cash.
Advocates for the system say it has also given India’s army of micro-vendors access to a wider range of financial services.
A customer makes a digital payment at a store in Bengaluru.Credit: Bloomberg
An umbrella organisation called the National Payments Corporation of India(NPCI), set up by the Reserve Bank of India and the Indian Banks’ Association, operates the massive electronic payments and settlement systems. The NPCI estimates that by late last year, it was processing more than 45 per cent of the world’s real-time monthly transactions.
A program to improve banking services for people on low incomes has been another plank of the transition. The Indian government claims to have opened more than 460 million new bank accounts for the poor in the past decade. That has allowed more welfare payments to be made directly to citizens, which has reduced opportunities for corruption at the local government level and providing a new way to deliver services.
According to Nalin Mehta, the author of the book India’s Techade, which traces the country’s digital revolution, the changes have facilitated a “new kind of welfare state based on digital direct benefit transfers and interlinked e-governance systems”.
Mehta says the new digital public goods have had a deep impact on society, politics and culture. “Digital India changes the basic plumbing that underlies Indian society, transforming politics, the government’s relationship with every Indian and the nature of the state itself,” he writes.
Mehta says the innovations have “profound implications for the rest of the world and for the future of global tech itself”.
India is already a giant technology supplier to the world. Exports of its IT and business process outsourcing services reached $US194 billion ($295 billion) in 2022-23, according to Nasscom, an IT industry peak body. A recent government survey found 5.2 per cent of 15- to 29-year-olds living in urban areas can write a computer program using specialised programming language.
Now India is encouraging other developing nations to follow its digital transformation lead and has offered to assist them, through a subsidiary, NPCI International, in the large-scale digitisation of its infrastructure. Neighbours Nepal and Bhutan have been using the payments system since 2022. According to Mehta, up to 43 countries have so far expressed interest.
NPCI International chief executive Ritesh Shukla says India’s digital transformation is forging a new model of economic development, which is sometimes framed as an alternative to the approaches of Western countries and China.
“Up to now there have been two models that people normally associate with,” says Shukla.
“One is a very Western model of development, a very capitalism-driven, very urban-centric one where you move people to the cities, create manufacturing units and create jobs. The other is a communist kind of model. I think we have created a model that is very unique, which relies heavily on the new technologies.”
A store displays a poster for a payment app in Bengaluru. The Modi government-backed payment infrastructure processed 11.4 billion transactions in October.Credit: Bloomberg
Disseminating this tech prowess could boost India’s economy and influence, especially in developing countries.
When Prime Minister Narendra Modi met with US President Joe Biden in Washington in June, their joint statement emphasised the need for “global digital inclusion” and stressed the two nations would work together to provide global leadership in digital public infrastructure.
Mehta says the digital system has emerged as “an important marker” of India’s soft power, and The Economist has even labelled plans to export digital knowhow as “India’s low-cost, software-based version of China’s infrastructure-led Belt and Road Initiative”. (China’s QR-code based apps facilitate micropayments on the mainland, and part of Beijing’s aid funding for Pacific islands also includes digital technology, such as an e-government infrastructure in Fiji.)
There are critics of India’s approach. Some have questioned whether the government-controlled system will attract sufficient future investment and promote cutting-edge innovations.
Concerns also linger about customer protections, privacy and data breaches.
Even so, a report released by the World Bank in September lauded the approach, saying it had allowed the nation to achieve in six years a level of financial inclusion that otherwise “would have taken nearly five decades”.
Modi frames the rapid expansion of the system as a national achievement attracting global attention.
He used India’s presidency of the G20 in 2023 to highlight the country’s digital achievements.
“In India, digitalisation has brought about revolutionary change,” Modi told a meeting of G20 ministers in September. “Technology is being used as a tool to empower people, make data accessible, and ensure inclusivity. India is willing to share its experience with partner countries.”
Get a note directly from our foreign correspondents on what’s making headlines around the world. Sign up for the weekly What in the World newsletter here.