BENGALURU: India will contribute 2.2% to the world’s digital payments market by 2023, while the value of such transactions is expected to reach $12.4 trillion globally by 2025, a report by Payments Council of India (PCI) and management consulting group Pricewaterhouse Coopers (PWC) said.
The report ‘Empowering payments: Digital India on the path of revolution', released at the Virtual Global Fintech Fest (GFF) 2020 on Thursday, said home-grown Indian innovation around digital payments infrastructure including Unified Payments Interface (UPI), Bharat QR and mobile wallets have ensured last-mile connectivity, covering small merchants, tea sellers and even hawkers.
The report estimates that India’s Unified Payments Interface (UPI) platform will reach nearly 59 billion in volume by 2023 owing to its high peer-to-peer (P2P) type of transaction penetration.
“…Clocking a run rate of 1 billion transactions every month, UPI has witnessed a compound annual growth rate (CAGR) of 785% in volume and 570% in terms of value from financial year (FY) 2017 to FY 2020," it said.
The report added that the reason why India is showing rapid progress in transformation of digital payments is predominantly due to its large population and demographics.
India’s strong position in the digital payments space can be attributed to regulation of costs of payment systems, laws in place, availability of alternate payment systems, share of electronic money in payment systems, steps taken by the central government, fast payment systems available in the country, volume and growth of e-money among others, it said.
Some of the initiatives undertaken by the central government includes the Ministry of Electronics and Information Technology (MeitY) setting up a devoted Digidhan mission to collaborate with stakeholders for promotion of digital payments in the country.
MeitY has also introduced several measures to increase the spread of digital payments by setting targets for banks to process digital payment transactions, Bharat Interface for Money (BHIM) cashback schemes and providing BHIM Aadhaar merchant initiative schemes.
Among other prominent digital payment products in the country are Bharat QR and BHIM QR, which has gained significant traction in the Indian market, along with Bharat Bill Payment System (BBPS) which has shown CAGR growth 1,590% in terms of volume, the report added.
Even Aadhaar Enabled Payment System (AePS) has been adopted by the central government for transferring benefits and is expected to clock 2.5 billion transactions by FY23, according to the report.
The report also underlined the huge impact of the ongoing covid-19 pandemic on the industry.
The pandemic has also paved for newer trends playing out in the Indian digital payments industry, including rise in contactless payments, and businesses are looking at integrating their online and offline channels to provide an omni-channel experience to their customers.
The PCI-PwC report also added that the Indian digital payments space will undergo consolidation, as players look to generate additional revenue for up-selling and cross selling products.
“Mergers and acquisitions will be the path followed by companies, to grow inorganically and establish themselves as a leading player in the market. These acquisitions could be aimed at improving the way companies offer their products or enhance their presence in the payments value chain by offering new products," the report said.