India’s Digital Payment Expansion: A Legal and Socio-Economic Analysis

Author: Shrushti borade, Manikchand Pahade Law College, Ch.Sambhajinagar

Abstract


India has seen a sharp rise in the digital payment system thus bring tremendous
change in the financial transaction process. Building on legally sound,
governmental and technological foundations the country has evolved from a
cash-based, to a digital financialised society. To map the actual path of digital
payment expansion in India based on legal aspect supported by legal provisions
and case laws and data challenges and prospects have also been discussed and
analyzed.


The Proof: India’s Digital Payment Surge
Exponential Growth:
India crossed the $3 trillion mark for digital payment transactions in 2023 with a
Compound Annual Growth Rate of 27% formed 2018.
UPI or unified payment interface, initiated by NPCI (National Payments
Corporation of India) had more than 10 billion transactions monthly by 2024 and
has set a global standard.


Government Initiatives:
Digital India Campaign: This one was launched in the year 2015 and the overall
intent of the program is to make India a digitally for India.


PMGDISHA (Pradhan Mantri Gramin Digital Saksharta Abhiyan): Specializing in
providing digital skills to the rural community.
DigiDhan Mission: Appropriate for financial inclusion by the provision of digital
money instrument.


Private Sector Contribution:
Currently, online payment systems such as Paytm, PhonePe, and Google Pay have
greatly contributed to the improvement of the uptake of the payments.


There is an increased successful association with banking organizations, which
enhance the efficient and secure payment processes.


Legal Jargon and Framework
The indigenous digital payment landscape in India is, therefore, governed by a
robust legal structure that guarantees the standard requirements of safety,
openness, and arbitrariness. Key legislations include.


The Payment and Settlement Systems Act, 2007 (PSSA):
An Act to regulate payment systems in India and had the provision of RBI
regulation of payment system
Section 4 of the Act gives the right of authorization and regulation of payment
system operators to the RBI.
The Information Technology Act, 2000 (IT Act)
Recognition of electronic transactions and digital signatures on the legal level.
The idea of compensation for failing to protect personal data has been provided in section 43A.


RBI Guidelines:
Master Directions on Digital Payment Security, 2021: The third one entails
insisting on compliance with security standards on the payment operators.
Prepaid Payment Instruments (PPI) Guidelines: Manage wallets and cards issuing
and operation.


Consumer Protection (E-Commerce) Rules, 2020:
Protect the consumers interest while engaging in transactional activities.
In this paper, the following case laws shall be discussed to highlight how digital
payment disputes are viewed in different legal jurisdictions.


Google Pay Case (2020):
Issue: Accusations of failure in fulfilling sections of PSSA provisions.
Verdict: The Delhi High Court supported RBI’s decision stating that Google Pay
falls under the Third Party Application Provider aka third grade UPI beneficiary
that do not come under PSSA directly.


RBI v. Sahara India Financial Corporation Ltd. (2022):
Issue: Lack of compliance with the operation norms of payment systems.
Verdict: To avoid such incidence, the Supreme Court proceedings obliged enhanced compliance with the PSSA licensing.
Shreya Singhal v. Union of India (2015):
Although the above cases are not directly related to the payment perspective regulatory judgment Section 66 A of the IT Act underlined the need for balanced
regulation and liberal freedom within digital networks.


This article covers challenges of expanding digital payment in the following sub-
topics


Data Privacy and Cybersecurity:
Besides, many aspects ordinary: Insufficient proper enforcement of the Personal
Data Protection Bill, 2019.
Recent cyber attack cases such as Juspay data leak 2020 that affected Millions of customers.


Digital Divide:
Internet is still a luxury for many rural households with only 55% having good
internet by year 2024.


Fraud and Misuse:
New crime rates reported to the NCRB suggest that digital payment scams rose
by 15% in the year 2023.


Regulatory Ambiguities:
Parallel mandates between RBI, TRAI and MEITY result in compliance
Inefficiencies

Conclusion


India owes a lot to this technological revolution in the field of digital payment,
laws, and the strong unity both the government and the private sector have
shown. The two legal dispensations of PSSA and IT Act have set good precedents,
but issues such as data privacy, digital literacy, as well as cybersecurity are
urgent ones. It is now important to build up on these achieved regulations,
increase consumer protection and encourage inclusion.

FAQS

1. There are some important laws that have primarily governed the process of
digital payments in India
The regulation of digital payments in India is undertaken through the Payment
and Settlement Systems Act 2007, the Information Technology Act 2000 and
rules and regulations made by RBI.


2. Are UPI transactions safe?
UPI transactions are highly secured by MPIN and device binding, In case of any
fraud, MPIN can prevent such a transaction.


3. What should I do if I am a victim of digital payment fraud how do I seek justice
in law?
You can always escalate your concerns to your bank, write to RBI Ombudsman or
even can file a complaint under the Consumer Protection Act, 2019.


4. What steps are being taken to try and tackle cybersecurity issues?
The RBI specifies the rules of high security for payment operators and the
government is in the process of elaborating the Personal Data Protection Bill.

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