India is the world’s seventh largest economy, and the fifth largest personal consumption expenditure (PCE) market globally. With all the efforts put in by the industry in driving digital payments deeper and wider across the country over the past year, India has emerged as one of the fastest adopters of digital forms of payment ever. And still, India continues to retain its tag as the world’s largest cash displacement market in absolute terms.
The government’s focus on driving digital payment penetration has certainly been a catalyst over the past year. There has been an evident escalation of digital commerce over these past months, in turn reaping benefits for consumers, businesses and the economy in general. Digitization of payments forms the building block towards creation of a formal and transparent economy, helping us in the fight against corruption, terror financing and unaccounted wealth. In the longer run, moving towards a less-cash economy will boost the country’s GDP and will bring about a deep structural shift in the economy. As we have witnessed over the recent past, it also offers the perfect platform for digital entrepreneurs to innovate and develop products and solutions that could truly change the way the world transact. In particular, open-loop solutions with the potential to reach out to mass markets and help spread the digital footprint far and wide.
With over 800 million debit cards and over 30 million credit cards in the market, almost every household in India now has access to a digital form of payment. Even more heartening is the emergence of the humble debit card as a preferred form of payment over the past year. At 3X growth in payment volumes and over 3.5X growth in transactions, consumers are beginning to enjoy the benefits of the debit card beyond its use as an ATM cash withdrawal instrument. Non-discretionary spending categories such as fuel and groceries have emerged among the largest spending categories, indicating digital adoption across the mass market. The single largest reason for this surge could be attributed to the rapid expansion of the acceptance infrastructure in India.
Since the start of the year, the industry has added over 1 million new acceptance points, increasing the number to 2.8 million across the country. The trend continues across e-commerce platforms too, with more consumers preferring to transact using digital forms of payments. Notwithstanding the significant progress we have made over the past year alone, there is a lot more work to be done. At a modest 11%, the country’s electronic Personal Consumption Expenditure (ePCE) rate is a far cry from some leading economies around the world with ePCE rates upwards of 60%. By expanding the acceptance infrastructure, energising innovative methods of payments, and bolstering financial participation through stronger, open collaboration, we can continue to move up this value chain in the future.
Digital commerce is well and truly on its way to changing the way Indians pay and get paid in the future. The opportunity to leverage digital commerce beckons consumers, businesses and government’s alike. How we seize this opportunity would eventually determine our ability to play a lead role in the transformation towards a digital world.
T.R. Ramachandran is group country manager (India and South Asia) at Visa.