Exactly a year ago, the Indian government demonetized Rs 500 and Rs 1000 currency notes, causing a huge blow to an economy that still conducts 80 percent of its economic transactions through cash. A move meant to fight corruption and increasing horde of black money, this demonetization proved to be a golden opportunity for the digital payment market.In November 2016, the Reserve Bank of India (RBI) reported 169 million transactions via prepaid payment instruments (PPIs), and 87 million transactions via mobile banking. RBI data further indicates a 171 percent year on year growth of PPI transactions from 96 million in August 2016 to 261 million in August 2017. Mobile wallet transactions grew 219 percent year on year from a mere 70 million to 225 million.\u201cDigital will drive the bulk of transactions in the next 2-3 years in India,\u201d says Ram Sarvepalli, partner and national leader, Advisory Services at EY India. He adds that it is critical to take all necessary steps to keep this momentum going to achieve a less cash ecosystem through regulatory and institutional support.According to D D Mishra, research director of Gartner India, the digital payment industry of the country is still largely untapped but may contribute as a significant portion of the GDP in a few years\u2019 time. \u201cWith the government\u2019s focus towards enabling digital payments, increasing the penetration and considering the gap which needs to be covered, the potential is good,\u201d he says.However, the steady momentum gained by the industry post demonetization seems to have been lost. After PPI transactions experienced a mysterious drop to 280 million in February, it currently stands at 261 million in August.\u00a0\u201cThe digital payment industry of the country is still largely untapped but may contribute as a significant portion of the GDP in a few years\u2019 time.\u201d\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0D D Mishra, Research Director, GartnerSurprisingly, mobile wallets seem to have fared the worst with 225 million transactions in August from its record high of 320 million in April. Immediately post the demonetization announcement, digital transactions spiked, but mostly because of limited cash supply. With rapid remonetization of the economy, it seems like the country is slowly going back to its old-school cash transactions.PwC estimates that 80 percent of India\u2019s economic transactions still happen through cash, compared to 21 percent in developed countries. But, the Indian government is rallying hard to boost digital payments in the country. While private players might not be faring as well as last year, Unified Payments Interface (UPI) and Aadhaar Enabled Payments System (AEPS) have been experiencing a steady and consistent rise. Initiatives like Startup India, India Stack, Jan Dhan Yojana and Aadhaar are proof of the government\u2019s commitment to the cause.\u201cPwC estimates that 80 percent of India\u2019s economic transactions still happen through cash, compared to 21 percent in developed countries.\u201dLast month, RBI introduced interoperability among KYC-compliant PPIs for seamless digital payments, a move greatly applauded by the industry. \u201cThis is a right step forward for increasing digital transactions and providing greater relief to users who often use multiple wallets. It also makes it easier for consumers and businesses to make and accept payments,\u201d says Mishra.Additionally, the industry is now witnessing newer players in the market. Google Tez launched in September, and October witnessed Flipkart showing a newfound interest in its payment arm, Phone pe. Even WhatsApp, which is perhaps the world\u2019s largest messaging platform got approval from the National Payments Corporation of India (NPCI) to enable in-app payments via UPI.While Mishra seems optimistic about the influx of new players, he said that the market will eventually be dominated by the large ones. \u201cGiven the size of the opportunity and the government\u2019s commitment towards digital transactions, it is but obvious that it will attract some of the large players like Google, Amazon and Flipkart,\u201d he adds.But there are inhibitors as well. According to Mishra, a lack of trust, awareness, education, internet penetration and bank accounts, coupled with the comfort of cash may stand in the way of seamless growth. \u201cDigital infrastructure and \u2018digital first\u2019 mindset can help in making progress towards a cashless economy,\u201d he adds.Earlier this year, a study by Google and BCG predicted that the digital payment sector of the country will be valued at USD 500 billion and will contribute 15 percent of the country\u2019s GDP. And with digital payments infiltrating even the smallest of stores across the country, it does seem like a really big possibility.