BackE-payments make comeback on wholesale transactions
Digital payments bounced back to nearly 72 billion in FY22, from 44 billion in the previous fiscalIn the financial year 2022, the retail payments increased 26% by value to ₹524 trillion
PremiumMUMBAI : After a year of covid-led downturn, digital payments bounced back in FY22 to nearly 72 billion by volume, from 44 billion in the previous fiscal year, primarily on the back of wholesale transactions.
Experts said that as consumption of goods and services grew following the easing of pandemic-led curbs and the economy picked up pace, firms reported improved capacity utilisation, which in turn led to a surge in large-value credit transfers.
While volumes for business transactions had declined for two consecutive years in FY20 and FY21, funds transferred through Real Time Gross Settlement (RTGS) facility, which is typically used by businesses, was up 31% from the year-ago by volume to 208 million, and 22% by value to ₹1,287 trillion. The data has been released in in Reserve Bank of India’s (RBI) annual report on 27 May.
However, retail payments were not affected by the pandemic and had continued to grow in FY20 and FY21. In 2021-22, retail payments rose 26% by value to ₹524 trillion.
“A significant impact of covid-19 was seen in the wholesale payments segment. Subsequently, it subsided and large payments grew in the last fiscal. Irrespective of the pandemic retail payments grew, both in the number of transactions and by value," said Navin Surya, chairman, Fintech Convergence Council.
Established in 2018, the council represents regulated financial service providers and fintech firms. Surya said while the use of paper-based instruments such as cheques fell in the last couple of years, there is some recovery after the decline in covid cases. “It is good to see that the domestic payments systems are more or less back to pre-covid levels," he said.
Although wholesale digital transactions suffered a setback during covid, the pandemic induced a shift towards digital payments in general, especially among individuals. According to a survey by the National Payments Corp. of India (NPCI), cited by RBI, one-third of the surveyed households transacted digitally for the first time during lockdowns. Households, which had moved away from digital payments citing difficulty in use, fraud, overspending and lack of internet access, were most likely to have started using online payments during the pandemic, it said.
A section of experts said while Unified Payments Interface (UPI) contributed significantly to retail payments, there are other factors at play as well. “The larger contribution to the surge in digital payments is the opening up of entertainment venues, and rebound in travel leading to increased flight, train, bus and hotel booking as well as e-commerce," said Vishwas Patel, executive director of fintech firm Infibeam Avenues Ltd. Mass consumption increases the use of credit cards, he said.
Patel said a significant improvement in the payments infrastructure, awareness campaigns and regulatory interventions by RBI and the government to improve safety and convenience of use also helped digital payments to grow.
Along with other experts tracking the sector, Patel believes there are huge opportunities for the digital payments industry to grow in India.
A recent PwC India report said with UPI leading the way, the digital payments ecosystem will also be driven by buy-now-pay-later, the proposed central bank digital currency, corporate payments and offline payments. In the report titled, Indian Payments Handbook 2021-26, PwC said domestic digital payments grew at a compound annual growth rate (CAGR) of 23% by volume and is likely to touch 217 billion in transactions by FY26.
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