Impact of Trust on Customer Adoption of Digital Payment Systems

Introduction

According to a whitepaper by MasterCard Advisors, “around 85% of all retail payment transactions are done with cash, which equates to 60% of retail transaction value” (Thomas, Jain, & Angus, 2013). The Indian government is developing the centralized Aadhar-based payment infrastructure to boost the success of digital payment system; however, the reports indicate that the rate of penetration is not as rapid as it is supposed to be. From the point of financial inclusion, India lags behind China and Kenya with 35%, 64% and 42% of the population banked respectively. The payment system in India is highly dominated by cash, with less than 0.1% C2C payments being done digitally (Bill & Melinda Gates Foundation, 2013). India has just begun to move towards cashless economy and is at the inception stage where the economy has shifted away from cash but at quite a slow pace in the last five years. The conditions in the market are not conducive enough to boost the pace towards cashless economy in India and thus it lags behind many other countries (Thomas, Jain, & Angus, 2013).

Banking system in India is highly concentrated in the large cities having high mobile network penetration in urban areas, whereas rural areas have low mobile penetration and banking system reach (Bill & Melinda Gates Foundation, 2013). There is a huge gender gap in the adoption of electronic payments in India. The World Bank data on global financial inclusion shows that females have been less accommodating in case of digital means of payments in their lifestyles (The World Bank, 2014). The World Bank data on financial inclusion clearly depicts the status of education and its impact on the usage of financial technology in India. Lower education levels may lead to lack of awareness of the financial technologies, their benefits and their know-how. This may create a strong resistance towards adoption of the digital payments. Wide proliferation of mobile technology is a prerequisite for adoption of mobile payments by the customers (Mallat & Tuunainen, 2008).

According to 2011 GEAR report, India scored 56.1 in the overall performance and Indian government ranked 36 among the 62 countries in the adoption of electronic payments. India attained quite a low score and rank in most of the categories. India ranks 47 in the category infrastructure and 54 in socio-economic context (Economist Intelligence Unit, 2012). However, India has jumped to the twenty eighth rank in 2018 global index ranking. It has been categorised an intermediate in adoption and ranks above compared to China and Kenya in the same category with 48 and 54 rank respectively (The Economist Intelligence Unit, 2018). Growth in adoption of financial technology by consumers worldwide is evident of bright future of digital payments all. As per the statistical data published, seventy five percent of the consumers “globally have adopted some form of money transfer and/or payment service” (Cherowbrier, 2019). China is the top most country having the highest transaction value of US $1,570,194 million made via digital payments in the world. Relatively, India and Kenya are making a slow growth in digital payment transactions valued at US $64,787.3 million and US $2295.8 million respectively. However, payments based on mobile technologies have been adopted more rapidly by consumers from developing countries than those from developed nations. On the other hand, there are stark differences in the rate of adoption within the country itself. There’s a rapid growth of digital payment acceptance in urban India whereas rural India still lags behind. Though research claims that advancement of payment technologies have positive influence on rural areas of South India, the gap between urban and rural markets still persists (Balaji & Vijayakumar, 2018).