Would you want to know what digital payments index is? Based on my research, digital payments index is a measure of the extent of digitization of payments across the country.
It is a first-of-its kind index to measure the spread of digital payments across the country. The index is calculated based on five parameters namely Payment Enablers, Consumer centricity, payment infrastructure on the demand side, and payment infrastructure on the supply side.
The index is calculated with 2018 as the base period. The 2023 DPI in India is 377.46. In 2022, it was 349.30 and in 2021 it was 304.06.
With this, RBI concluded that Digital Payments in the country increased by 24.13%. But that is not all however as you read further I will educate you more on what digital payments index is.
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Now let gets started.
What Is The Digital Payment Index
Digital Payment Index is a study that comes out annually and looks at how consumer payments are becoming more digital.
It does this by looking at three areas: how ready the market is for digital payments, how many people use digital payments, and how much people know and feel about them.
On a scale from 1 to 100, these factors are used by the index to measure how mature a market’s digital payments environment is.
There are separate studies for each of the world’s big markets, each with a lot of information and analysis about the present and future of those markets.
Five factors are used to figure out how standard digital payments are in India: payment drivers (25 per cent), payment infrastructure-demand-side factors (10 per cent), payment infrastructure-supply-side factors (15 per cent), and payment performance (45 per cent).
What Are The Essential Points Of The Digital Payment Index
RBI decided to publish the Digital Payments Index (DPI) semi-annually from March 2021 onward with a lag of 4 months.
Therefore, from 2021 RBI started releasing DPI for March and September in the months of July and January, respectively.
The Base period of the RBI-DPI has been set as March 2018, at a score of 100.
The DPI index comprises five broad parameters to evaluate the penetration of digital payments in the country.
Here are the Key PointsAbout the Index:
- The RBI-DPI comprises 5 broad parameters that enable measurement of deepening and penetration of digital payments in the country over different time periods.
- 5 Parameters:
- Payment Enablers (weight 25%),
- Payment Infrastructure – Demand-side factors (10%),
- Payment Infrastructure – Supply-side factors (15%),
- Payment Performance (45%) and
- Consumer Centricity (5%).
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What Are The Parameters Used To Calculate Digital Payment Index
The following parameters are used in calculating the DPI:
- The payment enablers are the Internet, Merchants, Aashar, Mobile, Bank Accounts
- The Payment Infrastructure on the Demand side are debit cards, FASTags, Customers registered with mobile and internet banking, prepaid payment instruments, credit cards, and debit cards
- Payment Infrastructure on Supply-side are bank branches, ATMs, QR codes, intermediaries, PoS terminals, business correspondents
- Payment Performances are cash withdrawals, currency in circulation, paper clearing, unique users
- Consumer Centricity are complaints, awareness, education, declines, system downtime
What Contributed To The Increase Of Digital Payment Index
UPI – the Unified Payments Interface increased by 1.3%. UPI is a multi-bank account system. It allows money transfer 24/7, merchant payment, collections, donations, utility bill payments, QR code-based payments, etc.
Transactions made through the National Payments Corporation of India increased by 2.6%. NPCI processed more than 6,752 crores of transactions in the fiscal year 2023. In 2022, the platform made 7,404 crores of transactions.
The Fintech Adoption Rate in India increased to 87%. It was 64% at the global level.
India has the third largest digital transactions in the world after US and China
The transactions made through AEPS, that is, Aadhar Enabled Payments Service increased to Rs 26,000 crores of rupees per month on an average
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WHO Released Digital Payment Index
It was developed by the Reserve Bank of India (RBI) in order to assess the degree to which payments are being digitized throughout the nation.
It correctly represents the growth of a variety of digital payment channels and is based on a number of different characteristics.
For the purpose of capturing the digitalization of payments, the Reserve Bank of India (RBI) created the composite Digital Payments Index (RBI-DPI) in January 2021, with March 2018 serving as the base.
Since then, the index has been gradually climbing, and in September of 2021, it successfully surpassed the 300-point milestone.
Moreover, The Reserve Bank of India (RBI) launched its Digital Payments Index in January 2021 with the purpose of determining the degree to which payments in India have been taken over by digital technology.
Payment enablers, payment infrastructure, payment performance, and customer centricity are the four characteristics that were used in the creation of the index, which is published every six months.
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Final Thought
Now that we have established what digital payments index is, also know that The DPI (Digital Payments Index) measures payment digitization countrywide and shows the increase in digital payment methods.
The five primary parameters have different weights and are released semi-annually.
Parameters: Payment Enablers (25%), Payment Infrastructure – Demand-side (10%), Supply-side (15%), Payment Performance (45%), and Consumer Centricity (5%).
As mentioned above, The RBI will produce a composite Digital Payments Index to measure digitization. It also proposed a sector self-regulatory organization.
Since digital payments in India are expanding quickly, the bank will create and publish a composite Digital Payments Index (DPI) to measure payment digitization.