Thread by @ankits_tweets

Current pandemic expected to catalyse growth of digital payments. 📈
A part of the Indian payments history covered in a thread below 👇🏽
#fintech

The Rupiya (introduced by Sher Shah Suri), remained the dominant standard currency in Mughal era & even during the British Raj, despite the East India Company’s efforts to introduce the Sterling Pound in India as early as the 1600s. Declared official currency post 1857 rebellion.

Paper currency was popularised in Asia by Genghis Khan as early as the 11th century, gained traction in India a few centuries later. General Bank of Bengal and Bihar (1773-75) and The Bank of Hindostan (1770-1832) were among the earliest issuers of paper currency in India.

Cheques introduced by The Bank of Hindostan, in 1770. The Negotiable Instruments Act of 1881 formalised non-cash modes of paper payments (such as cheques, bills of exchange & promisory notes). The Indian Coinage Act, 1906 was passed which governed establishment of Mints.

The First World War left the Indian economy in dire straits, and the need for an apex monetary authority was identified. The Central Legislative Assembly set up the Reserve Bank of India (RBI). It gets formally inaugurated on April 1, 1935, with its Central Office at Kolkata

RBI relocated to Mumbai in 1937 and issued its first series of notes which now bore a portrait of the new British monarch — George VI. The Five Rupee note was the first one to be issued in this series and Rs. 1, 2, and 10,000 notes were subsequently added

When the Republic of India was established on January 26, 1950, the portrait of George VI on the Rupee note was replaced by an image of the Ashoka Pillar. It was in 1996 that the first notes bearing the picture of Mahatma Gandhi were printed.

The Parliament passed the Banking Companies (Acquisition and Transfer of Undertakings) Bill, 1969 and nationalised 14 of the country’s largest commercial banks in 1969. In 1980, the government further nationalised six more commercial banks, controlling 91% of banking industry.

Credit card is introduced by the Central bank of India in 1980 in association with VISA and MasterCard.

In 1986, RBI took first steps towards computerising the financial systems. Magnetic Ink Character Recognition (MICR) introduced for more efficient check processing. The banking sector had another upheaval coming up soon. A year later, HSBC sets up first ATM in Mumbai.

Facing an economic crisis in 1991, caused in large part due to the USSR collapse & the Gulf War, India introduced liberalisation policies that allowed the entry of private banks into the country. HSBC Bank, ICICI Bank, HDFC Bank, and UTI Bank (now Axis Bank) ushered in a new era

India's GDP growth rate, which had hovered around 3.5 % from independence through mid-1980s, reached closer to 5.5 % by the mid-90s. This applied more pressure to payments systems. Internet was started in India by VSNL LIMITED with an average speed of 9.6 Kbit/s in 1995.

In 1999, Indiaplaza.com launched India’s first e-commerce website. India’s first-ever payment aggregator “BILLDESK” launched its operations in India, in 2000. In 2002, India's first e-ticketing launched by IRCTC.

2004 : Moving past decentralised network of thousands of local clearing houses, India acquired a Real Time Gross Settlement (RTGS) system in 2004, it was the 69th country to do so, behind Cuba, Ghana and Malawi.

Nov 2005 : RBI launched National Electronic Fund Transfer (NEFT) system. Unlike RTGS, fund transfers through the NEFT system were not on real-time basis, but in hourly batches.

2007 : The Payments and Settlements Systems Act gets passed, was much needed to fill gaps in regulation. Outlines rights and duties of various actors in payments ecosystem.

Jan 2010 : National Payments Corporation of India (NPCI) officially begins operations. Launches National Financial Switch (NFS), that provides ATM connectivity in the country.
Nov 2010 : NPCI launches Intermediate Payment System (IMPS), a real-time, 24*7, push payments system

Jan 2011 : Aadhaar Enabled Payment System (AePS) is launched, allows payment recipients to performs banking activities with Aadhaar and a biometric verification.
India's Cheque Truncation System (CTS) : Transferred to NPCI

2011 : A killer urban use-case in form of mobile recharge emerges, as adoption of smartphones kicks off. PayTM, Mobikwik, FreeCharge become prominent as mobile wallet providers.

FreeCharge gives McDonald's coupons on mobile recharge, an instant hit amongst college students. Indians become more comfortable with online micro-payments. Another contributor was e-commerce as Flipkart's presence grew across the country. A bunch of 'kart' sites crop up.

2012 : NPCI launches Rupay - domestic debit card product targeted at mass market. From the start, personal insurance was incorporated. Performing at least 1 txn in a 3 month period got a cover of up to Rs 1 Lac (around USD 1500) in accident, life & permanent disability insurance

2012 : NPCI launches National ACH (NACH) to replace RBI's legacy ECS services. Today, CTS and NACH are the only two NPCI services that are mandatory for all banks to use.

2012 : NPCI launches Aadhaar Based Remittance Service (ABSR), a pre-cursor to Aadhaar Enabled Payment System (AePS). ABRS didn't enable bulk payments, never scaled but provided an imp. testing ground for later services

Feb 2013 : Aadhaar Payments Bridge System (APBS) launched : capability for bulk payments & govt-led social welfare programs. By 2019, more than USD 100 billion has been transferred directly to the beneficiaries over seven years (equivalent to 5% of average period GDP)

Jan 2014 : RBI recommends creating Payments Banks. Aug 2014 : 2FA mandated for online card payments. Uber affected. Later, Uber ties up with PayTM wallet. Gives the wallet use case further boost.
*99# allows feature phone owners to transact over NPCI rails with their bank.

Feb 2015 : UPI APIs published on NPCI website.
Aug 2015 : 11 payments banks get licenses
Dec 2015 : Yes Bank - MoU with iSPIRT @Product_Nation

2012 to 2015 : Mobikwik, FreeCharge and PayTM get PPI licenses. Mobile wallets were going to get the tough competition from UPI soon.

Feb 2016 : Technical launch of UPI, UPI Hackathon attracts 300+ startups

Apr 2016 : UPI Business launch by RBI Gov. Dr. Raghuram Rajan, protocol for standardised & secure digital transactions, has push & pull based payments. Enabled unbundling of accounts from customer experience. Apps can collect debit consent from user w/o being custodian of money

Oct 2016 : SBI and HDFC join UPI.

Nov 2016 : Demonetisation strikes!

29 Dec 2016 - BHIM launch. At PM Modi's request, app called BHIM in honour of Dr. Bhim Rao Ambedkar, the revered champion of India's oppressed & a key architect of India's constitution).

Jan 2017 : Demonetisation leads to rapid QR code adoption by merchants. They get an overnight crash course on QR codes.

Feb 2017 : BharatQR becomes common standard for QR codes.

Aug 2017 : Bharat BillPay System (BBPS) launches. Uses NPCI infra, but it has its own scheme rules.

Aug 2018 : NPCI launches UPI 2.0. Linking of OverDraft account and one-time mandate.

2015-2018 : close to 1300 Fintech startups are founded in India

2018 - Over 500 million RuPay cards issued with nearly 60% of those in market, representing 25% of all card txns.

While UPI accounted for only about 80 million transactions in October 2017, the number jumped to 480 million just one year later

2019 : UPI crosses 1 billion transaction volume mark. Does more daily txn vol than AmEx

In three years since 2016, it has handled a total of more than 12 billion transactions compared with 5 billion credit card transactions over the same period.

Banks were hesitant to get on-board with UPI early on. Today, there are 155 banks on UPI, representing more than 90 % of the Indian banking industry’s total assets.

Oct 2019 - Announcement of UPI to be available soon as a payment method in Dubai and Singapore

2019 : Google writes to Fed Reserve, sharing their experience with UPI in India. Urges to follow India’s UPI model to build real-time payments network. H/T : @sehaj23

NEFT goes 24 * 7 on Dec 16, 2019. Free of charge for savings a/c from Jan 1, 2020

With impending innovation from market players like WhatsApp Pay and more, UPI expected to grow manifold.

The digital footprint created will further create digital imprint to democratise credit.

Fin.

Sources for deep dive in :

Cook, William and Anand Raman, NPCI white paper - CGAP, [yourstory.com/2017/11/india-…](yourstory.com/2017/11/india-…), BIS Paper on Fintech Lessons from India