The setting up of the Reserve Bank Innovation Hub in March 2022 is another step taken to encourage and nurture financial innovation in a sustainable manner through an institutional set-up. III.5 Against this backdrop, this chapter provides a detailed account of the evolution of digital payments and factors that contributed to its rapid growth, the impact of digital payments in various spheres of the economy and implications for central banks and their policies. Section III traces the stages of India’s digital payments trajectory and examines the enabling forces; it also presents insights from a primary survey of merchants and consumers on the awareness, adoption and usage of digital payments. Third, digital payment platforms built on the principles of DPI — openness, interoperability, and trust facilitate both adoption and usage at scale. As we have outlined in Section III, both Pix and UPI constitute the payment layer in the DPI Stack, leveraging both digital ID and existing data exchange protocols.
The Automated Clearing House (ACH) service enables direct bank-to-bank transfers for inexpensive, high-volume payments from payroll to billing services. However, with a one-to-two business day settlement, ACH services are not for those needing urgent transfers. Some payment networks exist on a wider scale than others; Mastercard and Visa are recognised worldwide. UnionPay is dominant in China and widely accepted across Asia, which makes it a required connection for anyone selling into those markets, while American Express and Discover operate closed-loop systems in which the network also issues and acquires. Beyond authorisation, the payment processor works by handling settlement, moving the collected funds from the transaction into the merchant’s bank account.
And digital systems will only reinforce inequity if they aren’t designed to meet the needs of women and those with the least access to resources and opportunity. Biometric authentication uses physical or behavioral characteristics, such as fingerprints, facial recognition, or voice recognition, to verify a user’s identity. This biometric technology in digital payments has improved the security of payments by reducing the risk of fraud and identity theft. We will take a closer look at the latest innovations in this field and examine what they mean for the future of digital payments. III.67 Financial literacy (FL) is a precondition for promoting digital financial inclusion.
As payment systems evolve, cross-border payments are becoming increasingly efficient with the advent of advanced technologies such as blockchain and payment orchestration. These innovations are set to revolutionize the cross-border payment landscape, offering increased efficiency, reduced costs, and faster transaction times. Importantly, they also ensure regulatory compliance, providing a secure environment for international money transfers. By 2025, we expect a significant reduction in the cost and time of cross-border transactions due to these innovations in payment infrastructure and the growing integration of crypto payments.
Whether you’re running a small online store or a global enterprise, Stripe makes it easier to handle digital payments. The cost structure is generally transparent, and the platform is designed for a wide range of business types. That means you can start with a single online store and later add more payment methods, build subscription models, or accept in-person payments without having to rework your entire system. If you run a business, whether it’s online or a physical store, you should understand how digital payments are processed and how they shape your daily operations. Below, we’ll explain how digital payment systems work, how to set them up, and how Stripe helps businesses handle their digital payments.
Those ecosystems were wide open for disruption because the baseline experience was still more manual. They’re deeply embedded across merchants, banks and consumer habits due to the sheer entrenchment of their systems globally. This bundling built powerful relationships between banks and early giants like WorldPay, Verifone and First Data.
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Marketplace payment infrastructure allows multiple sellers to connect to buyers simultaneously; often, a multi-party settlement is required. The SEPA Credit Transfer (SCT) allows euro payments from bank to bank to euro-enabled countries. Most payments settle in one business day to prevent any international complications within the eurozone. Merchants must comply with standards set by processors, issuing banks, acquiring banks and creditledgers, even arbitration challenges. Compliance means costs for those who don’t play fair and know how to play due to reputationally debilitating misconduct, access or disallowed processor entry. EMV chip transactions generate a unique cryptogram for every payment, so intercepted card data cannot be replayed, which is what effectively ended card cloning at the point of sale.
In FY25, 176 million people used new or enhanced digitally enabled services through WBG-wide projects. Challenging and fragmented regulatory infrastructure in this new world can have real world impacts. Take policy fragmentation, for example, which is estimated to cost the global economy up to $5.7 trillion,³ limiting access and inclusion for both individuals and businesses worldwide. To date there are different data localization measures across 40 countries⁴ which have a direct impact and hinders fraud prevention efforts given the complexity of the global environment. Our team of experts is dedicated to staying on the cutting edge of technology and utilizing the latest advancements in digital payment infrastructure to deliver secure, efficient, and accessible payment solutions that meet the unique needs of our clients.
“cash Is King, But Digital Is Divine” – The Metamorphosis Of India’s Payment Infrastructure
Businesses should explore relevant IoT payment opportunities and be prepared to embrace this emerging trend. Providers may provide better performance due to smart routing, dispute antennae and consolidated reporting from the start. SLAs prevent uptime failures, so operational risk otherwise absorbed by companies needing to put headcount against risk is eliminated. Building gives maximum control to companies that have significant engineering resources, companies subject to strict compliance, or companies with truly unique or niche workflows not accommodated by typical third-party solutions. Tokenisation and encryption are two ways to protect sensitive payment data, but they work differently. Strong Customer Authentication (SCA) is defined as a legal requirement set forth by the European Union’s Payment Services Directive 2 (PSD2) legislation.
Fintechs, in turn, are expanding into each other’s territories seeking sustainable profits (e.g., a payments fintech adding lending to boost margins, a lending fintech adding payments to get more data and fee income). From a revenue share perspective, as of the mid-2020s, payments is the top category (driven by sheer volume of transactions and the fact that even a tiny fee on trillions of dollars adds up). The remaining categories (wealth, insurance, banking services) together make up the rest. However, these shares can vary by region – for instance, in some emerging markets, payments (especially mobile money) might be an even more dominant part of fintech revenue, whereas in the U.S., fintech lenders (including credit card fintechs, etc.) contribute a big portion. It’s also notable that fintech companies often straddle categories, making precise segmentation tricky (e.g., PayPal has payments revenue from transactions and also interest revenue from its credit products). Demonetization, innovation of Unified Payments Interface (UPI), emergence of e-wallet players, and innovative digital payment solutions have ushered in the digitisation of financial transactions.
- While fraud levels remain relatively low, it remains a concern since a large section of the rapidly expanding user base are new to digital payments.
- And here, for example, cloud technologies and artificial intelligence come to the rescue, providing tools and capabilities to enhance your own products, making them more adaptive to various requests and budgets.
- As Brazil and India became more digitized over the last decade, the digital payments ecosystem leveraged the expansion of fast and reliable data networks, as well as mobile phone penetration, across all segments of the population.
- Next, a payment gateway or payment processor secures sensitive data and transmits the appropriate transaction information to the designated payment processor for authorisation.
The merger was completed on October 13, 2023, and the merged grid has been named as National Grid Clearing House (NGCH). The merger has improved liquidity and efficiency of the system and enabled rationalisation of cheque clearing infrastructure. After the merger, all cheques presented through the CTS are being processed as local cheques. III.3 The efficiency gains from harnessing digital technologies in payments are leading to significant reduction in transaction costs and ease of doing business, benefitting consumers, businesses, and economies. Along with e-commerce, digital payments through the ease and convenience of transactions have Anelium Corp. article fostered entrepreneurship.
The payments landscape is shifting fast, shaped by legacy entrenchment, challenges facing new methods and the rise of smarter, more agile solutions. According to Corefy’s Payment Maturity research across 672 global merchants, 58.5% of businesses are still operating in a fragmented state — multiple disconnected payment systems with no unified view. Only one in four have consolidated into a unified setup, and just 11.7% have reached the responsive or agile stages where routing and fraud rules adapt automatically. Every payment system must be designed to protect sensitive payment data and ensure that transactions are processed safely and in line with regulatory requirements. This means adhering to strict industry standards like PCI DSS, which governs the secure handling, transmission, and storage of payment information across all payment methods. Card networks, such as Visa and Mastercard, are major payment networks and form part of the global payment rails that connect issuers and acquirers.
The negative and statistically significant substitution effect between cash and digital modes can, however, be outweighed by the combination of positive income and precautionary effects depending upon the prevailing circumstances (Awasthy et al., 2022). III.60 Even as digital payments are growing rapidly, demand for cash still remains generally high. Cash continues to be used as a store of value and a preferred choice during periods of heightened uncertainty, as seen during the COVID-19 pandemic (Ashworth and Goodhart, 2021; Awasthy et al., 2022). It is also the dominant mode of payment for certain segments of population, like older people (Khiaonarong and Humphrey, 2022). These developments and country-specific factors are reflected in divergent currency to GDP ratios and trends across the world.
Instead of applying for financing the old way, retailers can access capital instantly, based on how their business is performing. When open banking launched, it wasn’t offering a dramatically better experience for consumers in the U.K. And looking at it from a user experience perspective, Apple Pay and open banking are the same. Some providers might charge slightly more but include better fraud protection, a more flexible interface, or better reporting. Ensure you’re clear on your volumes, your average transaction size, and the countries you’ll be selling to, then consider which fee structure makes the most sense for your business model. The customer sees a payment confirmation message, and the business is informed that the purchase went through.
They reduce merchant transaction costs and promote financial inclusion, as even the smallest micro businesses can access and provide digital payment solutions without ancillary fees. Emerging markets (Asia-Pacific, Africa) are where digital payments growth is highest, but often margins are lower (due to price-sensitive customers and sometimes regulation). We might see more profits generated in places like India or Indonesia as their volumes explode, albeit each transaction yields little profit, the volume makes up for it. If domestic schemes or government initiatives dominate there (like India’s RuPay or UPI with zero MDR on small transactions), private companies’ profit might actually be limited unless they find adjacent services.
In 2022, there were 17.4 million registered agents with 65 billion annual transactions totalling US$ 1.26 trillion. On average, a mobile money provider was connected to around 18 banks and processed US$ 22 billion of international remittances in 2022 (GSMA, 2023). Institutional FrameworkIndia’s financial inclusion drive over the last decade enabled the rapid growth of digital payments.
The legacy payment infrastructure, which was once effective, simply cannot cope with what users and businesses expect. And here, for example, cloud technologies and artificial intelligence come to the rescue, providing tools and capabilities to enhance your own products, making them more adaptive to various requests and budgets. In July 2025, UPI processed over $29 billion in payments through 19.46 billion transactions. In contrast to the same month last year, when there were 14.43 billion transactions, registering an increase of about 34 percent in just one year. The UPI system now serves over 491 million individuals and 65 million merchants, connecting over 675 banks in a single platform.
Instead, customers can use their mobile devices or payment cards equipped with near-field communication technology to make purchases. Contactless payments are becoming increasingly popular due to their convenience and speed. The primary growth factors are the global deployment of real-time payment rails creating new infrastructure investment requirements and open banking regulatory mandates compelling financial institution API platform development. 1 Real-time account-to-account (A2A) payment systems like PIX and card networks are also examples of open-loop payment systems. III.74 Laws and guidelines protecting consumers from deceptive practices and consumer awareness can go a long way in combating dark patterns. CiC growth has recorded some moderation amidst strong expansion in digital payments (Chart III.25b).
On 15 July 2025, the Bank of England issued a statement entitled A New Approach to Retail Payments Infrastructure. As part of this statement, the Bank of England and HMT announced a new delivery model and way forward for the UK’s retail payments infrastructure — a move widely welcomed across the industry. The Global DPI Program will continue to build on ID4D, G2Px, and FASTT to help countries design and scale up trusted, inclusive, and reusable DPI systems.
An emerging segment of fintech uses artificial intelligence (AI) and machine learning as a core differentiator in payments and financial services. These “AI-driven” platforms apply algorithms to optimize payments (for example, routing transactions through the cheapest or fastest network in real time), to detect fraud and anomalies, and to personalize user experiences. As of 2021, over 12,000 fintech startups globally were already leveraging AI in some form. Notable examples include Feedzai and Stripe Radar (AI-based fraud prevention systems used in payment processing), Kasisto and Cleo (AI chatbots providing financial assistance or customer service), and robo-advisors in wealth management (which automate investments). Incumbent financial institutions are also integrating AI – for instance, large processors like Fiserv and card networks use AI to improve network security and uptime, while banks deploy AI for real-time payment fraud monitoring.
24 Promotions or offers that catch a user’s attention may lead them towards initiating a transaction. However, at the last moment, the conditions change, or the offer is no longer available, and users are steered towards making a more expensive purchase. The result travels back through the chain network → processor → gateway → merchant website or POS. As IoT devices become more prevalent, new payment opportunities are emerging, such as connected cars that enable in-car payments or smart appliances that can order and pay for items automatically.
The payment flow is the journey a transaction takes from the moment a customer submits payment information to the moment the funds reach the business. Both CPQ and billing software can integrate with payment infrastructure to streamline the entire sales process. Payment processors charge a fee for each transaction or a percentage of the total amount processed. The fees vary depending on the type of transaction, volume, and any additional services the business requires. Once approved, the payment gateway sends a confirmation to the merchant’s website, allowing the transaction to be settled.
They help facilitate payments from the issuing to the processing bank for credit card authorisation and settlement. This bank connects merchants with other payment processors or external credit companies, but facilitates the transit of funds into the hands of the merchant. How payment infrastructure works comes down to moving funds from one party to another across several interconnected networks and systems in a secure fashion. There exists a regulated process by which steps and parties are organised to promote compliance, functionality, and speed. Disruption is reshaping US payments through economic volatility, regulation, and tech advances. Policies on inflation, tariffs, digital assets, and real-time payments align with wider AI adoption.