India’s digital payments industry may reach $10 trillion by 2026: Report
As a result of this unprecedented growth, digital payments (non-cash) will constitute two out of three payment transactions by 2026 with contributions from across India.
![India’s digital payments landscape has witnessed phenomenal growth over the past five years. (iStock) India’s digital payments landscape has witnessed phenomenal growth over the past five years. (iStock)](https://images.livemint.com/img/2022/06/02/600x338/58051e06-170b-11ec-a597-e468bf93ac55_1635120001561_1654154981053.jpg)
India’s digital payments market is at an inflection point and is expected to more than triple from the current $3 trillion by 2026, according to a report by PhonePe in collaboration with Boston Consulting Group (BCG). This market excludes large B2B/ G2B payments.
According to the report, as a result of this unprecedented growth, digital payments (non-cash) will constitute two out of three payment transactions by 2026 with contributions from across India.
India’s digital payments landscape has witnessed phenomenal growth over the past five years.
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 also lists the levers for the growth of digital payments in India, which include simplified customer onboarding, 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. It also talks about how IoT, 5G & CBDC will provide further impetus to growth.
Commenting on the report, Karthik Raghupathy, head of strategy, and investor relations, PhonePe, said, “We have seen the growth of UPI over the last few years. Not surprisingly, UPI saw about nine times transaction volume increase in past three years, increasing from five billion transactions in FY19 to about 46 billion transactions in FY22: accounting for more than 60% non-cash transaction volumes in FY22.
According to Raghupathy, this indicates that digital payment has truly gained ubiquitous acceptance across the country.
“While tier I-II cities have witnessed high acceptance of digital payments penetration in tier III-VI cities shows headroom for growth. The next wave of growth will now come from tier III-VI locations, as evidenced in the past two years wherein tier III-VI cities have contributed to nearly 60-70% of new customers for PhonePe," Raghupathy said.
Prateek Roongta, managing director and partner, Boston Consulting Group believes that India is set to become a digital payment economy as source of payments invert with 65% transactions being done digitally by 2026, as opposed to 40% 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," Roongta said.
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