An interesting article in the NYT on how India's homegrown payment system has transformed commerce and helped formalize the economy. Excerpts:
Billions of mobile app transactions — a volume dwarfing anything in the West — course each month through a homegrown digital network that has made business easier and brought large numbers of Indians into the formal economy. The scan-and-pay system is one pillar of what the country’s prime minister, Narendra Modi, has championed as “digital public infrastructure,” with a foundation laid by the government. It has made daily life more convenient, expanded banking services like credit and savings to millions more Indians, and extended the reach of government programs and tax collection.[...] It is a public-private model that India wants to export as it fashions itself as an incubator of ideas that can lift up the world’s poorer nations.
Indian officials describe the digital infrastructure as a set of “rail tracks,” laid by the government, on top of which innovation can happen at low cost. At its heart has been a robust campaign to deliver every citizen a unique identification number, called the Aadhaar. The initiative, begun in 2009 under Mr. Modi’s predecessor, Manmohan Singh, was pushed forward by Mr. Modi after overcoming years of legal challenges over privacy concerns. The government says about 99 percent of adults now have a biometric identification number, with more than 1.3 billion IDs issued in all.
The IDs ease the creation of bank accounts and are the foundation of the instant payment system, known as the Unified Payments Interface. The platform, an initiative of India’s central bank that is run by a nonprofit organization, offers services from hundreds of banks and dozens of mobile payment apps, with no transaction fees. [...]The system has grown rapidly and is now used by close to 300 million individuals and 50 million merchants. Digital payments are being made for even the smallest of transactions, with nearly 50 percent classified as small or micro payments: 10 cents for a cup of milk chai or $2 for a bag of fresh vegetables. That is a significant behavioral shift in what has long been a cash-driven economy.
