Why it is Stalled in the Adoption of FASTag Beyond Tolls
Why it is Stalled in the Adoption of FASTag Beyond Tolls
Shrouded with a reputation of being the revolutionary toll-collecting technology initially, the FASTag proved to be the main drag in the path of its increased usage.
Even though it is implemented nationwide on highways and the number of transactions is large, FASTag has not matured into a significant choice of payment methods, even though India has a large number of cars and other automotive users.
The basic problems?
The existence of high infrastructure, lack of commercial interest and low consumer validation.
NPCI data show that FASTag transactions volumes have stagnated at 350-380 million rounds per month since January 2024, with the monthly volume of settlements stagnating at 6,000-6,500 crore.
This trend in the participation numbers of banks is joined by the fact that there are 38 banks participating in it as of May 2023, continuing to slowly. UPI, in turn, has had a far greater share, but in the same period, its base of banks has increased by the same amount to 675, which highlights the fact that other digital payment systems dominate it in terms of relevance and coverage.
FASTag was initially imagined as a form of powering various vehicle payments, such as those covering fuel and parking, but in the real world, it is barely used in those areas. As some of the higher-end malls have installed parking based on the FASTag system, smaller companies are reluctant to do so as installation costs of 1.5 to 2 lakh per gate on average, plus the maintenance cost, have held back many.
Besides, the fuel payment part has been entirely a non-starter, impaired mostly by the fact that there is almost no margin to fintech or retail participants. An executive of one of the most popular digital payment platforms shares his opinion: there is no economic reason for selling fuel via FASTag.
To make things worse, there is no good consumer care. Customer service provision is carried out by way of partner banks, and as such, users go through a lot of hardships, such as blocked tags and failure of recharges, with very limited support. Even the distributors such as PhonePe and Amazon Pay are not able to cope, since they do not control the infrastructure of support.
The reasons also cited by experts include the absence of marketing investment and user incentives as the driving factors in the development of UPI, but they are lacking in FASTag.
In the absence of such drivers and accompanied by the fact that currently, there are no fintech players that are actively driving new integrations, the overall potential of the system remains untapped.
As things are, FASTag is a toll-only product, and until there is a decrease in the cost of infrastructure and the entrance of new business models, the growth of the same will not be significant. India might not succeed in revising its digital toll solution unless there is room to incentivize the embracement of new use cases and close customer experience gaps, making this solution a one-trick pony.
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