The Reserve Bank of India (RBI) has introduced a new index in order to measure the growth and adoption of digital payments in the country. The RBI revealed that virtual payments grew 2x in March 2020 when compared to March 2018.
The index was created with March 2018 as the base period. The score for March 2018 was set at 100 and the March 2020 index score worked out to 207.84, the RBI confirmed.
The index consists of five key parameters, each of which have a set weightage and also have sub-parameters associated with them. They include payment enablers (25%), payment infrastructure-demand-side factors (10%), payment infrastructure-supply-side factors (15%), payment performance (45%), and consumer centricity (5%). These parameters will include several other sub-parameters that will help the RBI with carrying out research studies to analyze and potentially improve the country’s digital payments ecosystem.
Payment enablers consists of several different channels through which consumers gain access to virtual payments. They include Internet, mobile, Aadhaar, bank accounts, debit cards, prepaid payment instruments, point of sale terminals, ATMs, and QR codes.
Payment performance, which has the greatest weight in the index, will be used by the RBI to measure key factors like volume and value of virtual payments, unique end-users, paper clearing, total currency in circulation, and outstanding cash withdrawals.
For customer centricity, the reserve bank will be taking into consideration factors such as customer education and overall awareness, fraudulent activities, complaints, declines or payment rejections and total system downtime.
As noted in the announcement, the reserve bank’s digital payments index (DPI) will be released on a semi-annual basis, beginning on March 2021 and onwards.
The RBI stated on January 1, 2020 (Friday) that the composite DPI would aim to capture the extent of digitization of payments across India. This index was first introduced by the central bank on February 6, 2020, as part of the monetary policy statement for FY20.
The RBI further revealed the DPI for March 2019 and March 2020 “work out to 153.47 and 207.84 respectively, indicating appreciable growth.”
Digital payments and Fintech adoption have surged in India during COVID, while other sectors struggled to maintain operations.