India’s push towards cashless payments accelerated in 2019, as card and mobile payments as a percentage of GDP rose to 20% in the October-December quarter, from 135 in the same quarter a year ago
NEW DELHI: Mobile-based payments will be resilient and overtake card payments, even as covid-19 induced economic slowdown is likely to put a pause on the rapid rise of cashless payments this year, S&P Global Market Intelligence report said on Tuesday.
“High growth rates in cashless payments seen in recent years are unlikely to repeat amid an economic slowdown due to the novel coronavirus pandemic," says Sampath Sharma Nariyanuri, Fintech Analyst at S&P Global Market Intelligence.
“However, we expect mobile payments to be more resilient and will gain a bigger lead over card payments, as their uptake will accelerate due to ongoing social distancing measures and concerns over usage of cash and plastic," Nariyanuri said.
India’s push towards cashless payments accelerated in 2019, as card and mobile payments as a percentage of GDP rose to 20% in the October-December quarter, from 135 in the same quarter a year ago, according to S&P Global Market Intelligence’s 2020 India Mobile Payments Market Report. India ranks favorably among countries that built instant payment schemes, processing at least five times more transactions than the second-largest market based on analysis of real-time payment volumes.
Mobile payments initiated by payment apps comprising account-to-account transfers and payments made from stored-value accounts rose 163% to $287 billion in 2019. By comparison, point-of-sale transactions completed using debit and credit cards, including online and in apps, rose 24% to $204 billion, the report said.
“While a large number of transactions handled by payment apps include peer-to-peer transactions, mobile phone account recharges and utility bills, mobile payments are increasingly becoming a popular payment choice for retail transactions at the point of sale and online," it said.
S&P Global Ratings in late May slashed its GDP growth forecast for 2020-21, to a contraction of 5.0% from an earlier growth projection of 1.8%, as the Indian economy is expected to suffer from the pandemic and nationwide lockdown. A decline in private consumption--one of the key determinants of GDP--could have some adverse impact on cashless payments this year.
Cashless payments gained momentum after Prime Minister Narendra Modi after the he announced the massive currency culling exercise of scrapping ₹500 and ₹1,000 notes on November, 2016 that led to a temporary shortage of cash in hand. This gave further kick to payments via point of sale (PoS) machines and led rise and popularity of mobile –based payment options such as wallets and real-time payments system Unified Payments Interface (UPI).
In October last year, transactions via the three-and-a-half year old instant payments system UPI recorded a fresh high of 1 billion transactions. UPI-based digital payments platforms such as Google Pay and PhonePe handled over 7 billion transactions in total, representing more than two-thirds of UPI transactions in 2019.
The report further said that as banks are expected to reduce their exposure to unsecured lending amid the ongoing pandemic, payment apps will have an opportunity to play a mainstream role in providing loans and insurance.
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