The digital payments industry will more than triple to $10 trillion by 2026 from the existing $3 trillion today, according to a study by the Boston Consulting Group and Phone Pe.
The report, titled Digital Payments In India: A $10 Trillion Opportunity says that non-cash payments will constitute nearly 65 per cent of all payments by 2026, up from 40 per cent today, and almost 75 per cent of people will use India’s unified payment interface (UPI) in the next five years, up from the existing 35 per cent.
Digital payment merchant transactions will also increase seven-fold to $2.5-2.7 trillion by 2026 from the existing $0.3-0.4 trillion today, the report says.
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Prateek Roongta, managing director & partner, Boston Consulting Group, said that “India will increasingly observe digital payments getting embedded in all forms of commerce,” in the days to come.
According to the report, the entry of multiple new players has positively disrupted the digital payments ecosystem in India.
“It has been positively disrupted by the entry of multiple new players with diverse offerings driving payments at scale, and niche players offering financial services, such as credit, wealth management and insurance. Leading global and Indian Fintech players have been key drivers of UPI adoption in India among end users, aided by merchants with user-friendly transaction interfaces, and innovative offerings, supported by an open API ecosystem,” the report said.
“We will also witness the progression from embedded payments to embedded finance. As more and more merchants begin to accept digital payments, it will unlock a significant change in access to credit for small merchants due to the creation of a digital transaction trail,” Roongta says.
“India is set to become a digital payment economy, as source of payments invert with 65 per cent transactions being done digitally by 2026, as opposed to 40 per cent transactions today. Merchant payments will emerge as the most powerful driver of this growth, especially in the offline segment, due to growing QR code deployments. We expect that merchant payments will soon outpace person-to-person fund transfers,” he adds.
According to the report, several factors, such as simplified customer on-boarding, continued push for consumer awareness, merchants getting greater access to credit, expanding merchant acceptance, infrastructure upgrades and the setting up of a financial services marketplace driving growth in underpenetrated regions have led to the growing popularity and acceptance of digital transactions in India.
Karthik Raghupathy, head of strategy and investor relations, PhonePe, says: “UPI has supercharged India’s transition to non-cash payments when it comes to both person-to-person (P2P) and person-to-merchant (P2M) transactions. Not surprisingly, UPI saw about nine-fold transaction volume increase in past three years, increasing from 5 billion transactions in FY19 to about 46 billion transactions in FY22, accounting for more than 60 per cent non-cash transaction volumes in FY22. This indicates that digital payment has truly gained ubiquitous acceptance across the country.”
He adds: “While Tier 1-2 cities have witnessed high acceptance of digital payments, penetration in Tier 3-6 cities shows headroom for growth. The next wave of growth will now come from Tier 3-6 locations, as evidenced in the past two years, wherein Tier 3-6 cities have contributed to nearly 60-70 per cent of new customers.”
https://government.economictimes.indiatimes.com/news/digital-payments/digital-payments-market-in-india-will-more-than-triple-to-10-trillion-by-2026-report/98538049?action=profile_completion&utm_source=Mailer&utm_medium=newsletter&utm_campaign=etgovernment_news_2023-03-11&dt=2023-03-11&em=cGFua2FqLnByYW1hbmlrQGdtYWlsLmNvbQ==
