Rural India lags on digital payments despite UPI usage doubling in FY22

India's Unified Payments Interface (UPI) - developed by the National Payments Corporation of India (NPCI) in 2016 - processed a record worth of Rs 84 lakh crore across 4,597 crore transactions in FY22, more than doubling in terms of value and volume of transactions over the FY21 figures.

However, for the country whose people have embraced UPI transactions dearly due to the post-pandemic aversion to plastic currency and embracing of the digitised form of payments, financial inclusion continues to be elusive six years from the launch of one of the robust payment systems in the world.

Only 3-7 per cent of rural consumers are actively using UPI to transact, according to a field research by 1Bridge, a village commerce network.

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1Bridge has its presence across 10,000 villages in the states of Karnataka, Maharashtra, Andhra Pradesh, Telangana, Tamil Nadu and Odisha. It provides a technology platform to local entrepreneurs, known as 1Bridge Advisors, in the villages to generate additional income by allowing them to undertake deliveries, financial transactions, and order aggregation facilities in their villages.

As part of this research, 1Bridge surveyed its network of 1Bridge Advisors across 500 villages to understand the usage of UPI for payments by their customers. Additionally, "our research team also conducted field visits to about 120 of these entrepreneurs including bakeries, kirana stores, mobile phones shops and pharma stores to validate the findings of the survey," said Madan Padaki, Founder & chief executing officer of 1Bridge.

Around 40 per cent of those surveyed, said that they were unaware of UPI & digital payments and did not know how to use them. "There were some who said that they stayed away due to fear of losing their money through digital payments," Padaki added.

About 20 per cent expressed a preference for cash-based payments, despite having knowledge of UPI, while 10 per cent cited low bank balance or inactive bank accounts.

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Padaki pointed out that there is still work that needs to be done on the infrastructure side of UPI. "There are several banks that still do not have good UPI infrastructure. In rural settings, many times UPI transactions do not even go through successfully," he added.

He also said that the study revealed interesting use cases of UPI, "for instance, we saw shop owners using it to return the change instead of cash or the traditional way of giving a chocolate due to unavailability of cash." In some cases, UPI was also being used to make digital transactions for others who do not have UPI.

Padaki said that 1Bridge, which announced a partnership with WhatsApp, has been working with the messaging platform to push for financial inclusion in rural India by bringing awareness about the digital payment interface and handholding people in making them do their first digital transaction and giving freebies in the form of cashback to win their trust.

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