Contents

Introduction  

Payment methods have significantly changed over time, reflecting the shifting demands of industry and the economy. Payment mechanisms have significantly impacted the economy of India. With numerous government efforts pushing digital purchases and cashless payments, India is quickly moving towards a more digital economy.  

"Payment instruments" refers to various procedures or equipment to transmit money between parties. Some of the most popular payment methods listed are Cash, cheques, credit cards, debit cards, electronic fund transfers, mobile payments, electronic payments, prepaid cards, and digital currencies are all acceptable forms of payment.  

This is a quick summary of the development of payment methods and how they have affected the economy:    

The barter system is the earliest payment type in which commodities and services are exchanged for other things and services. Since it was difficult to determine the worth of the commodities and services, which might result in disagreements over fair exchange, the barter system had a limited effect on the economy.   

Metal Coins

In the 7th century BC, metal coins were first used as money. Metallic money standardized the worth of currency, enabling businesspeople to compare the cost of products and services with precision. Also, it aided trade between various nations and regions, promoting economic expansion.   

Paper Money

Around the seventh century AD, paper money was first utilized in China. Paper money allowed governments to manage the money supply, thus helping stabilize economies. It was also more convenient to carry and then use than metallic money. But the availability of paper money also made it simpler for governments to boost their economies by printing more money, which resulted in rising prices and financial instability.   

Credit Cards

Around the middle of the 20th century, credit cards debuted. Credit cards accelerated trade by enabling people to make purchases of goods and services without using cash or cheques. Due to the ability of consumers to make credit-based purchases of goods and services, credit cards also contributed to the expansion of the consumer economy.     

Digital Payments 

Electronic platforms are used to send money; digital payments represent the most recent development in payment instruments. Due to the speed, convenience, and security of digital payments compared to more traditional payment systems, economic growth and globalization have expanded. Financial inclusion has been made possible by digital payments, allowing those who were previously shut out of the official financial system to engage in the economy.   

Impact on the economy 

Digital payments have had a significant impact on the economy of India, especially after the demonetization of high-value currency notes in 2016. 

The government's push towards a cashless economy has led to a surge in digital payments, resulting in several economic benefits. 

Increased Financial Inclusion

Digital payments have made accessing financial services more straightforward, especially for those previously excluded from the formal banking system. With the help of digital payments, people can now make transactions without needing physical cash, making it easier for them to participate in the economy.  

Boost to Small Businesses

Digital payments have boosted small businesses previously dependent on cash transactions. With the help of digital payments, small businesses can now accept payments from customers without needing physical cash, making it easier for them to manage their finances.   

Reduction in Black Money

Digital payments have helped reduce black money circulation in the economy. With the help of digital payments, it is easier to track transactions, which has made it difficult for people to evade taxes and hide their income.  

Increased Efficiency

Digital payments have made transactions faster and more efficient. With the help of digital payments, people can now make transactions from the comfort of their homes, reducing the need for physical travel and paperwork.  

Overall, digital payments have had a positive impact on the economy of India, and it is expected that the trend toward a cashless economy will continue in the future.

Conclusion  

Payment instrument use has boosted financial inclusion, increased transparency, and fuelled economic growth in India. The safety of digital transactions & closing the digital gap in rural regions remain significant obstacles, though. 

Click here to learn more about how did the payment ecosystem evolve.