BY NAVRAJ JAIN
ABSTRACT
Digital payments have emerged as a dominant factor in changing the lives of Indians, bridging the gap between rural and urban areas. While much of the existing research focuses on either the adoption rates of UPI or its impact on spending patterns, our study specifically explores the differences in spending habits between rural and urban populations after the introduction of UPI. This paper includes both primary and secondary data; surveys were conducted to gather information on spending behaviours in rural areas, while data for the urban population were sourced from existing research papers and scholarly articles. Our findings suggest that the majority of rural residents tend to spend less and prioritise saving, whereas urban populations exhibit an increase in spending. These results align with previous studies on the topic. Our research provides valuable insights into the contrasting usage and spending trends between rural and urban populations in India as influenced by UPI.
INTRODUCTION
Over the last decade, there have been technological innovations in the payment methods that have enabled individuals worldwide to transition from cash transactions to digital payments. Most popular digital payment platforms include Apple pay, AliPay, WeChat Pay, Google Pay etc. (Matthewson, 2024).India had contributed 46% of total global transactions in 2022 , thus making it the leader in digital transactions. In this landscape, India has emerged as one of the leading examples of digital payment adoption, mainly through the Unified Payments Interface (UPI). UPI is a system which was launched by National Payments Corporation of India (NPCI) in 2016 which uses only a single app to connect to multiple banks. Hence, it is very convenient for people to handle different transactions at once (NPCI ,2023). Research has shown that India experienced a staggering growth of payment transactions through UPI from 2,071 crore in 2017-18 to 18,737 crore in 2023-24, [press information bureau (2024)].
In India, the population can be categorised into urban and rural groups, which might differ in their ability to use UPI. To begin with, urban areas are well developed, where the concentration of infrastructure such as houses, commercial building, roads and bridges etc. are very high. A survey conducted in an urban area showed that 74.2% of total respondents had agreed that the usage of UPI had led to an increase in their spending behaviour .(From Cash to Cashless: UPI’s Impact on Spending Behaviour among Indian Users, 2024). In a study by Rafee et al. (2022) in Chennai and Mumbai , it was found that 79.7% of the urban population felt that they were overspending due to the availability of UPI. Similarly, Padmavathi et al. (2021) had examined people’s spending habits in Coimbatore focusing on clothing, entertainment, food, travel, and home décor.With cashless transaction it was observed by the investigator that there was increased expenditure in all these categories.In contrast to this, there were some instances showing that people working in urban areas are able to manage their expenses properly because of UPI.(Das, 2024)
Exploring digital payment adoption in rural areas reveals unique patterns in how individuals interact with UPI and how it influences their spending behaviours. These areas, generally situated outside urban centres or in remote locations, face several challenges in terms of connectivity and financial inclusion (India.gov.in, 2013). Notably, rural regions are home to 65% of India’s population(Team, 2023).Gadge and Rai (2019) found that people from Brahmapuri area gave more preference to cash rather than UPI due to the lack of knowledge, low literacy level and internet issues.Though another researcher found that awareness of UPI was higher than its actual usage among the rural population living (Umesh Maiya, 2020).
Considerable amount of research has examined how urban populations interact with UPI, focusing on ease of use and changes in spending habits following its adoption. However, findings on rural populations remain inconsistent. The existing literature has provided mixed findings into rural users' usability of UPI. Moreover, studies specifically addressing UPI’s impact on their spending behaviours are limited. Hence, our current study will use primary and secondary data to investigate whether differences in spending habits influenced by UPI exist between rural and urban populations. Additionally, we predict that the urban population spends more with the availability of UPI in comparison to the rural population.
LITERATURE REVIEW
A research was done collecting information from various urban regions in India from cities such as Chennai, Bangalore and few more. A sample survey of 192 people were taken to gather information from them. According to the survey 153 people(79.7%) of the total respondents felt that they were over spending and 24 people(12.5%) were unsure about their spending habits .The remaining 15 people(7.8%) realised that the use of UPI had not indulged them to spend more. Furthermore , Another question recorded ,that out of 192 people ,154(80.2%) of them felt that their savings were becoming less and only 14(7.3%) respondents had opposing thoughts to this question.This research paper showed that there was notable shift towards the use of UPI which led to an increase in consumer overspending, reducing their savings among the urban population. (Rafee et al., 2022). A similar research study was published to bring out the influence of UPI on the population living in Coimbatore City on selected products(Clothing and accessories, Entertainment and Communication, Food, travel and Home décor products) . They had collected their data from 228 respondents . According to the results it was seen that there is an increase in expenditure in all the five categories if the transactions are cashless based.(Padmavathi et al., 2021)(there is a table also, needed). One study was conducted to understand the changes UPI has caused in spending patterns of the urban population on an individual level (From Cash to Cashless: UPI’s Impact on Spending Behaviour among Indian Users, 2024).After surveying a total of 235 participants and interviewing them, it was found that 91.5% of respondents were satisfied with UPI, while the remaining percentage consisted of individuals who were dissatisfied or neutral towards it. Additionally, 95.2% of respondents found UPI to be convenient to use. This suggests that the urban population prefers to make transactions through UPI because it is a quicker mode of transaction and eliminates the need to carry large chunks of change in cash. While UPI is highly efficient and widely satisfying for users as it does not have a processing fee, studies indicate that 74.2% of users have actually increased their spending after adopting UPI. The increase in spending habits can be explained due to the tangible and transparent nature of these payments(Ahn & Nam, 2022).
Nevertheless, there are instances showing that people from urban areas are handling their finances in a more effective manner and are becoming mindful of their spending habits.
A coconut seller from New Delhi uses UPI to receive his payments, keeping it in his bank accounts as savings and managing his expenses through cash. He is then able to track his expenses and prevents him from overspending.
Another instance was of a domestic helper who works in Greater Noida (rapidly developing area).Previously, her wages were being paid by cash which was further
stolen by her husband to fulfil his alcohol addiction. But now with UPI her earnings are safe with her and is able to spend efficiently and uses it for her daughter’s education(Das, 2024).
However there were some more articles, journals published that were based on the increased spending due to UPI in urban areas.On the other hand, the articles we could find presenting the opposite stance were restricted to the instance listed above.
Now for rural areas, a research was published which explored the awareness of UPI among the rural population in Brahmapuri located in Chandrapur district of Maharashtra. This paper surveyed a total of 100 participants which showed that the majority of the people preferred to use cash as a mode of transaction. According to this study, the main factors restricting the spread of digital payments among these populations include concerns about cybercrime, lack of infrastructure, hacking issues, high illiteracy rates and insufficient security features,(Ashwin Gadge & Rai, 2019).
Similarly, another research indicates that the cashless economy has made an impact on the rural population living in Udupi Taluk in Karnataka by gathering information from 80 people living there . The survey conducted by the investigator revealed that only 45% of the rural people are doing transactions digitally , majority of them being highly educated. Furthermore the remaining 55% are not doing cashless transactions till yet. However there were 67% of the people who are aware of the cashless transactions system (Umesh Maiya, 2020)
Apart from this, one explanatory research which was conducted in three villages of Bihar revealed that older generations tend to resist using UPI, while younger generations are trying to integrate them efficiently into their daily lives. This suggests that the younger population is generally more knowledgeable about mobile technology and digital payment systems.(Mehta, n.d.)
An analysis was done by a professor stating that the transactions of low income groups are accumulated in their account through UPI and it keeps a record of all their expenses and incomes which helps in saving their incomes and making thoughtful decisions.
But apart from this there has been a mixed opinions on the adoption of UPI and not enough research done whether UPI has led to increase in spending or low spending among rural people. So we conducted a survey gathering information from rural people living in different districts across India.
RESULTS
RURAL: SURVEY CONDUCTED BY US ON RURAL AREAS
|
Statements |
Responses |
Total |
Total (%) |
|
Access to a phone with internet in the rural area |
Yes |
29 |
96.7% |
|
No |
1 |
3.3% |
|
|
Comfortable with technology |
Yes |
19 |
63.3% |
|
No |
11 |
36.7% |
|
|
Rural population using UPI? |
Yes |
21 |
70% |
|
No |
9 |
30% |
|
|
Impact of UPI on rural population’s spending habits |
Spend More |
10 |
33.3% |
|
Spend Less, Save More |
13 |
43.3% |
|
|
No change |
2 |
6.7% |
|
|
We do not use UPI |
5 |
16.7% |
NOTE: Total no of respondents were 30 belonging to different rural regions
URBAN: SURVEY CONDUCTED BY ANOTHER RESEARCHER ON URBAN AREAS
|
Statements |
Options |
Numbers |
Total (%) |
|
SATISFACTION LEVEL |
Highly satisfied |
129.25 |
55% |
|
Satisfied |
85.775 |
36.50% |
|
|
Neutral |
18.095 |
7.70% |
|
|
Dissatisfied |
0.94 |
0.40% |
|
|
Highly dissatisfied |
0.94 |
0.40% |
|
|
CONVENIENCE |
Highly convenient |
163.325 |
69.50% |
|
convenient |
60.395 |
25.70% |
|
|
neutral |
8.695 |
3.70% |
|
|
Inconvenient |
0.94 |
0.40% |
|
|
Highly inconvenient |
1.645 |
0.70% |
|
|
BUDGET EXCEEDANCE |
Yes |
140.53 |
59.80% |
|
NO |
93.53 |
39.80% |
|
|
Maybe |
0.94 |
0.40% |
|
|
DO USERS AGREE THAT UPI IMPACTS THEIR BUDGET |
Strongly agree |
54.05 |
23% |
|
Strongly disagree |
27.025 |
11.50% |
|
|
neutral |
62.745 |
26.70% |
|
|
agree |
54.755 |
23.30% |
|
|
disagree |
36.66 |
15.60% |
|
|
HOW OFTEN DO USERS USE UPI |
Daily |
190.585 |
81.10% |
|
Weekly |
36.66 |
15.60% |
|
|
Monthly |
2.585 |
1.10% |
|
|
Occasionally |
4.465 |
1.90% |
|
|
Rarely |
0.705 |
0.30% |
NOTE: Total gathered responses were 235
There is a different result for both urban and rural populations when we observe the spending pattern. 59.8% of people in urban areas felt that they were spending more and in total 46.30% agreed that UPI had an impact on their budget. Among rural population it was seen that 43.3%(13 people) of them opted for spending less and saving more. 81.10% of urban population use UPI on a daily basis . In rural areas 9(30%) families did not have a single member using UPI. Surprisingly, 19(63.3%) families were comfortable using UPI in rural areas. 95.2% of people in urban regions regarded UPI as convenient. 91.5% of urban regions were satisfied with UPI and 7.70% were neutral towards it.
Methods
Participants
Our sample consists of 30 participants from the rural population, with an average age of 32(31.533)__. Participants were recruited using convenience sampling, consisting of individuals who work in urban areas for their livelihood but originate from rural villages. To control for potential confounding variables, the survey instructed participants to respond on behalf of their families in their hometown.
Design & Materials Required
The independent variable of our study is the usage of UPI, while the dependent variable is the spending habits of rural and urban populations. Furthermore, given the limited research on UPI's impact on the spending behaviours of rural populations, our study is collecting primary data through Google Forms with 9 questions (refer to the Appendix) . In order to ensure inclusivity, the survey is available in both languages: English and Hindi (Mother Tongue of India).
CONCLUSION
In this paper, we were able to gather information to understand the influence of UPI on spending behaviour of urban population through secondary sources and for rural regions we conducted a survey covering different districts in India. In the result section and in majority of research listed above,
it is clear that more than half of the population in urban areas are overspending and furthermore around 140 people out of 235 as seen in table for urban population have agreed that they had exceeded their budget by spending through UPI . Meanwhile the survey displayed contrasting results, showcasing that majority of the rural population are spending less and saving more. More than three-fourth of the respondents surveyed in different research papers and articles, use UPI daily and more than half of the rural population have inculcated the use of UPI in their everyday life. Majority of the rural and urban population are comfortable or satisfied with using UPI as it is more convenient. Lately we can observe that still the usage of it and increase in spending is more in urban areas than rural areas. However the adoption rates and awareness of UPI is growing rapidly among the rural population.The only weakness of our study is the small sample size taken for conducting the survey . But still the survey provided us with valuable insights about the people in rural areas, otherwise our understanding about them would have remained vague.
References
Ahn, S. Y., & Nam, Y. (2022). Does mobile payment use lead to overspending? The moderating role of financial knowledge. Computers in Human Behavior, 134, 107319. https://doi.org/10.1016/j.chb.2022.107319
Ashwin Gadge, & Rai, P. (2019, January 1). Awareness of Digital Payments in Rural Area. https://doi.org/10.13140/RG.2.2.26762.21442
Das, Y. S. (2024, May 5). The UPI paradox: Making you overspend but helping others save. India Today.
https://www.indiatoday.in/sunday-special/story/upi-payment-making-indians-sp end-more-overspend-save-money-transactions-2535363-2024-05-05 From Cash to Cashless: UPI’s Impact on Spending Behavior among Indian Users. (2024). Arxiv.org. https://arxiv.org/html/2401.09937v2#bib.bib37
India.gov.in. (2013, November 13). Rural Indian| National Portal of India. Www.india.gov.in. https://www.india.gov.in/content/rural-indian
Matthewson, A. (2024, April 17). Top 10 Digital Payment Platforms: Features, Security & Global Reach.
https://fintechmagazine.com/articles/top-10-digital-payment-platforms-2024 Mehta, V. (n.d.). What are the obstacles and opportunities in rural areas to achieving a “Cashless India”? TCI.
https://tci.cornell.edu/?blog=what-are-the-obstacles-and-opportunities-in-rural areas-to-achieving-a-cashless-india-2
NPCI. (2023). UPI: Unified Payments Interface - Instant mobile payments | NPCI. Www.npci.org.in. https://www.npci.org.in/what-we-do/upi/product-overview Padmavathi, D., Matanjini, M., & Phil, M. (2021). Influence of Cashless Payments on Spending Behaviour. https://www.ijsdr.org/papers/IJSDR2109005.pdf press information bureau. (2024, September 20). DFS drives expansion of digital payments in india and abroad.
https://pib.gov.in/PressReleaseIframePage.aspx?PRID=2057013#:~:text=UPI %20has%20revolutionised%20digital%20payments,volume%20has%20reach ed%207%2C062%20crore.
Rafee, B., Ramesh, V., Asan, S. J., Amzad, B., Kolar, & Zaheed, M. (2022). A Survey On Implications Of Cashless Payments On The Spending Patterns Of Urbanites In The Era Of Digital India. IJFANS International Journal of Food and Nutritional Sciences -I) Journal, 11.
https://ijfans.org/uploads/paper/eda0c7fc0dad9a75160e978d7062fa11.pdf team, E. (2023, May 11). Unified Payments Interface: Revolutionising Digital Payments in India. Bharti Institute of Public Policy.
https://blogs.isb.edu/bhartiinstitute/2023/05/11/unified-payments-interface-rev olutionising-digital-payments-in-india/
Team, I. (2015, July 13). How rural India gained 86 million illiterate people. Business Standard India.
https://www.business-standard.com/article/specials/how-rural-india-gained-86- million-illiterate-people-115070700301_1.html
Umesh Maiya. (2020, October 22). CASHLESS TRANSACTION IN RURAL AREAS: A STUDY WITH REFERENCE TO UDUPI TALUK.
https://www.researchgate.net/publication/344807761_CASHLESS_TRANSAC TION_IN_RURAL_AREAS_A_STUDY_WITH_REFERENCE_TO_UDUPI_TA LUK
upes. (2024, October 24). UPES. Upes.
https://www.upes.ac.in/blog/business/rise-and-rise-of-upi
Appendix
Google Form for the Rural Population
Name:
नाम:
Age:
उम्र:
Village:
गाँव:
District:
जि ला:
What is the monthly income of your household?
आपकेघर की मासि क आय क्या है?
Does anyone in your household have access to a phone with internet in your area?
क्या आपकेघर मेंकि सी के पास आपके क्षेत्र मेंइंटरनेट वालेफोन की पहुँच है?
Do your family members feel comfortable using technology?
क्या आपके परि वार के सदस्य तकनीक का उपयोग करनेमेंसहज महससू करतेहैं?
Does anyone in your household use UPI?
क्या आपकेघर मेंकोई UPI का उपयोग करता है?
Has using UPI changed your household's spending habits?
क्या UPI का उपयोग करनेसेआपके खर्च की आदतेंबदली हैं?
