By Vijay Khubchandani, Founder and CEO, Seven
When we step into the market these days, we hardly see a shopkeeper fumbling for cash or change. Customers nowadays simply scan a QR code or tap their card, and the payment is completed within seconds. That familiar sound of the payment soundbox has become part of the routine. It does not just verify transactions; it also reminds us how far we have come in contactless payments. UPI alone recorded 16.58 billion transactions in 2024, reflecting the growing trust in digital payments.
This steep rise in contactless payments after the pandemic has been driven by the intersection of fintech innovation and financial inclusion goals. The Reserve Bank of India (RBI) has played a crucial role in this by building a strong regulatory framework and enhancing payment infrastructure. Initiatives like the UPI, BBPS, and AePS have redefined the digital payments landscape, making transactions faster, safer, and more accessible. This shift has not only changed how payments are made but also who gets to make them, paving the way for deeper financial inclusion through technology.
Financial Inclusion Through Technology
The fusion of technology and finance has fundamentally transformed the way people access and manage money. Contactless payments have removed traditional barriers, eliminating the need for physical bank branches, extensive paperwork, or high levels of digital literacy. Today, anyone with a basic smartphone or a tap-enabled card can participate in the economy without the burden of queues or handling cash.
In rural and semi-urban areas, where access to formal banking services remains uneven, the simplicity of scanning a QR code or tapping a card has made financial participation more achievable. Some fintech innovators have taken this a step further by eliminating the need for PINs, passwords, or OTPs, creating a completely frictionless experience. This ease of use is particularly valuable for first-time users, offering an entry point into the digital economy for those who may otherwise find traditional banking processes daunting.
The B2B Tech Ecosystem: Building the Foundation
Behind every effortless transaction lies a complex and dynamic tech ecosystem. Banks, digital wallets, and payment companies are investing heavily in API-based integrations with banking systems, enabling instant and secure transactions across platforms.
For merchants, particularly small and medium-sized businesses, contactless payments have transformed the point-of-sale experience. Affordable, NFC-enabled POS devices allow them to accept digital payments with minimal setup, unlocking new revenue opportunities and reducing dependence on cash. Moreover, each digital transaction leaves a data trail. This data offers banks and businesses valuable insights into consumer behaviour, especially in previously underserved regions. Such insights can help in designing better financial products and services, further advancing the cause of financial inclusion.
Wearable Payments: Expanding the Horizon
Wearable payments represent the next significant leap forward in the contactless payment system. Smartwatches and payment rings embedded with NFC chips are making it easier to complete transactions. One tap is all it takes. For users who find mobile apps or smartphones a hassle, wearables offer a simpler, more intuitive way to pay. They remove the need to carry a wallet or even a phone, providing a significant advantage for people in rural areas or for those with basic mobile phones. Wearable technology makes payments not only quicker but also more democratic, lowering technological hurdles and opening yet another pathway to the digital economy for millions. However, as promising as these innovations are, their full potential depends on overcoming certain key challenges.
Challenges and the Road Ahead
While the rapid growth of contactless payments is encouraging, there are challenges that demand focused attention. Awareness and education are vital, particularly in rural areas where many people are still unfamiliar with digital or wearable technologies. Building trust is equally important, as is ensuring that users feel safe and confident while making contactless transactions.
Merchant readiness poses another hurdle. Although many businesses have adopted digital payments, micro-enterprises and informal vendors may need to upgrade the payment infrastructure required to support emerging contactless methods. Additionally, regulatory frameworks must keep up with the pace of fintech innovations. Clear, forward-looking regulations that protect data, ensure fair access, and maintain security are also crucial to sustaining public trust and supporting long-term growth.
Conclusion
Contactless payment solutions have already transformed how millions of Indians engage with the economy, making financial participation faster, simpler, and more accessible than ever before. The extent of financial inclusion in India has increased to 64.2 as of March 2024, according to the Financial Inclusion Index. As digitalisation expands, wearable technologies are emerging as a powerful extension of this progress. With their ease of use and minimal reliance on smartphones, they lower the barriers even further, offering millions more a seamless entry into the digital economy. Together, contactless and wearable solutions hold the potential to unlock financial inclusion at an unprecedented scale. As India builds on its digital momentum, these innovations could bring the next 500 million users into the fold, making financial empowerment a reality for all.
