The US is behind on digital payments.

Vikram S Khatri -

The amount of change that we are witnessing in our times is unprecedented. For example, in front of our eyes, a rising Netflix decimated Blockbuster in early 2000. The US took the lead in the digital revolution starting early 1970 for banking, and sadly, it is now falling behind in digital payments compared to China and India. Sundar Pichai of Google thinks that "The US needs to 'learn' digital payments from India." UPI's open nature led to its success through user-driven apps for real-time payments through 140 member banks in India. In the US, it is ridiculous that it takes three days for an ACH transaction to complete. The following YouTube video explains it well.

The future of payments

Why does America fall so behind in digital payments compared to India and China? The main reasons are;

  • America still believes in Credit/Debit cards. India has revolutionized real-time mobile payments.
  • American consumers still have doubts over the security of payments on mobile.
  • The US still uses old, very complex, and slow payment systems, and the establishment of banks, etc., are reluctant to upgrade. If it ain't broken, why fix it.
  • The US still uses ACH (Automated Clearing House), which was designed for checks, and the workflow for ACH still uses batch processes.
  • The real-time payment technology is available, but banks are reluctant to use it.
  • The lawmakers are not pushing for real-time payments, and hence it is very difficult to see a change.

The hope is on Apple Pay, Google Pay, Venmo, Zelle, Square, Clover etc., but the problem is they don't talk to each other. In other terms, we are missing a common standard that everyone could follow.

In India, ask for the phone number of the hawker or scan QR-code and pay instantly and money transfers to the vendor's bank account instantly.  

We should not be ashamed to learn from India - who implemented UPI (United Payment Interface), and each bank is following UPI protocol to build applications to transfer money instantly to another person. Gone are the days of credit card swipe - sooner we get this, better we will be.