Understanding digital payment ecosystem evolution in India

Abstract

Digital payment space in India has seen an unprecedented growth in the second half of the last decade. The growth albeit a little slow at the start picked up a pace that converted the most ardent sceptics to believers. The transformation in the payment landscape owes its success to the concerted effort of multiple actors and strong push by the Government to ensure the penetration of digital payment methods and enable a cashless economy. This push follows in from the predicament of the Government to facilitate banking to the unbanked and underbanked leading to financial inclusion at large. It was the introduction of UPI along with other factors that facilitated the incremental growth in digital payment penetration in the Indian market. The technology, convenient and reliable, proved handy in the P2P as well as the P21P space. Businesses were keen to adopt and leverage the low-cost alternative UPI provided for customer acquisition on their platform. In the following sections we look at the UPI story starting with the motivation behind its development, the growth of the platform and, the impact it has had on the targets it ought to achieve. Following that we try to connect the literature on ecosystems with the Digital Platform Ecosystem in India that UPI is a part of. We try to enumerate and categorize the players in an ecosystem and place the actors in the discussed frameworks. This is followed up by a discussion on the narure of interdependencies and a novel response framework which firms can leverage as action recommender when an innovation or firm enters the ecosystem that it operates in. Following this we look at UPI's nature as a public good, the role of the regulator in shaping the ecosystem with a distinct end-result in mind compared to the way a firm shapes the ecosystem in which it participates or owns the technology. We end the report with a discussion on how frameworks on ecosystem evolution fit the UPI story and the possible avenues for UPI growth.