Digital payment has been one of the key features of the government's 'Digital India' initiative and online payment platforms and services have indeed spread in the country. However, its penetration and acceptance in the tier-II and tier-III cities still face some obstacles, market players said.

According to Credit Suisse report, India's mobile payments market is likely to touch $1 trillion by 2022.

Post the demonetization, whereby Prime Minister Narendra Modi on November 8, 2016 declared that Rs 500 and Rs 1,000 denomination notes would become invalid, digital transactions shot up tremendously. The Unified Payment Interface (UPI) also has been accepted well.

Despite the rise in the number of platforms that enable businesses to offer online payment experience to their customers regardless of location, instrument or mode, still, there is a long way ahead as the penetration has mostly been in tier I cities.

RBI expects the country will have five million active points of sale (PoS) machines by the end of 2021. However, to achieve it, there are several hurdles to be crossed.

A huge market has grown for products which enable vendors to accept payments through credit and debit cards. However, the ground reality is that although there are around a 100 crore credit and debit cards in the country, the number of PoS terminals is not enough.

Digital payments service providers and adoption of UPI platform by national and international players like Paytm, PhonePe, Google, WhatsApp and Amazon have played a major role in the transition of rural India along with the urban segment in terms of digital payments.

Issues which merchants face are generally related to initial investment and the recurring cost affiliated with acceptance, which can be mitigated by introduction of low-cost devices or device-less acceptance via payment apps for accepting Bharat QR or UPI payments.

Experts further say, micro, small and medium enterprises (MSMEs) can generate extra income by offering the entire digital ecosystem with options such as Bharat Bill Payments System (BBPS), Point of Sale machines and micro ATMs along with the digital payment wallets and platforms and payment banks.

Market players and sector experts are of the opinion that EMI (equated monthly installments) on debit card is going to be the game changer. As only a small section of the population has access to formal loans, EMI on debit card can tap this market and play a significant role. It would encourage consumers to shift to digital payments and opt for easy EMI options. This also enables merchants to offer more affordability solutions to their consumers.