Home / Industry / Banking /  UPI, pay later, digital currency to drive payments in coming years: PwC India
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MUMBAI : Although homegrown payments system unified payments interface (UPI) will continue to drive digital payments in India, newer avenues like buy now pay later (BNPL), digital currency, corporate payments and offline payments will shape the industry, according to a report by PwC India.

The report, provides insights into the current and future digital payments landscape and the key factors that are influencing customer spending behaviour and transactions in India. It also looks at upcoming trends in the payments ecosystem like (BNPL), e-RUPI, central bank digital currency (CBDC) and offline payments, and how ecosystem players are likely to adapt to these new payment trends.

Titled "The Indian Payments Handbook – 2021-26", the report pointed out that domestic digital payments market grew at a compound annual growth rate (CAGR) of 23% by volume and is expected to reach 217 billion transactions in FY26.

“We expect the payments industry to focus heavily on enhancing customer experience and providing customer options for payment, enhancing security, undertaking innovations in technology like distributed ledger technology (DLT) and emerging tech like internet of things (IoT) over the next couple of years," said Mihir Gandhi, partner and payments transformation leader at PwC India.

UPI has contributed significantly to this growth, reaching a record 22 billion transactions in 2020–21, PwC said, adding that UPI transactions are expected to reach 169 billion by 2025–26, at a CAGR of 122% since 2018.

The report also lays down some key trends that will contribute to growth of the digital payments industry in India. It said that existing products will continue to make inroads and gain additional wallet share of the Indian customers. Enabling of new use cases on UPI, Fastag and cards will continue to drive the growth in adoption and transaction numbers, it said.

That apart, the RBI has expanded the scope of tokenization to cover additional use cases like laptops, desktops, wearables, internet of things (IoT) devices along with card-on-file tokenization (CoFT). PwC said in its report that along with enhancing card-related security, it will ensure that the overall customer check-out experience remains intact.

Offline payments would also contribute to growth of digital payments in India. Poor connectivity and lack of access to online payment methods, the report said, have opened up an opportunity for offline payments. “The recent RBI guidelines on offline payments have provided a much-needed impetus to the segment," it said.

Last month, the Reserve Bank of India (RBI) launched UPI for feature phones, bringing about 400 million users of such phones under its ambit. Feature phones are basic phones, which typically provide voice calling and text messaging functionalities.

Lastly, the upcoming central bank digital currency (CBDC) could also be a game-changer, with the government announcing a rollout by RBI in FY23. “The Indian payments landscape has multiple rails that can be accessed through several channels. Given the present scenario, CBDC will need to co-exist along with the existing rails rather than replace them," the report said.

Some of the prominent use cases of CBDC that are applicable in the Indian context are programmable direct benefit transfer (DBT), online and offline retail payments and cross-border remittances, it added. 

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