Social equaliser – While promoting digital payments, care is needed to guard against cyber threats

Source: The post is based on the article “Social equaliser – While promoting digital payments, care is needed to guard against cyber threats” published in The Hindu on 17th January 2023

Syllabus: GS 3 – Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

Relevance: About initiatives to promote digital payments.

News: The Union Cabinet has recently earmarked ₹2,600 crores for providing banks with an incentive to promote digital payments. This has focused attention to broaden and deepen alternatives to the most widely accepted method of payment worldwide, cash.

About the recent push to promote digital payments

What are the other measures that promote digital payments?

National Payments Corporation of India and its Unified Payments Interface (UPI): It functions as a lynchpin transaction enabler. The December 2022 transaction was a 71% jump in volume and a 55% increase in value from a year earlier, the UPI volume last month was close to 54 times the transactions in December 2017, and a staggering 98.6-fold of the value seen five years earlier.

Indigenous RuPay credit and debit cards: These indigenous initiatives does not require Merchant Discount Rate (MDR), thus benefiting Indian banks.

Role of private financial technology or fintech firms: They offer tailor-made digital applications. Big technology and social media companies have also added digital payments to enhance their core offerings.

What is the need to promote digital payments?

-The Reserve Bank of India’s ‘Payments Vision 2025’ document observes that ‘payment systems foster economic development and financial stability’ while supporting financial inclusion.

-The rapid and widespread adoption of digital payment methods, coupled with steps to bring more people into the banking system’s fold, has significantly helped cut the reliance on cash for low-value transactions, especially in metros and cities.

What should be done to further promote digital payments?

Policymakers need to urgently ring-fence the wealth of individual spending data being generated and constantly enhance security to safeguard the payments system from cyberthreats.