Digital payments in India projected to reach $10 trillion by 2026: PhonePe Pulse and BCG release report on digital payments
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Highlights
of the report:
●
Value of
digital payments in India to increase three-fold from US$3 trillion today to
US$10 trillion by 2026
●
Digital
payments will constitute nearly 65% of all payments by 2026, up from 40% today
●
UPI
adoption will surge from 35% in FY 21 to 75% in the next five years
●
7x growth
in digital merchant payments - from US$ 0.3-0.4 trillion today to US$ 2.5-2.7 trillion
by 2026
India, 2022: PhonePe,
India’s leading digital payments company, in collaboration with Boston
Consulting Group (BCG), today unveiled a report titled, “Digital payments in
India: A $10 trillion opportunity”. The report leverages BCG’s industry
expertise in payments and the fintech domain, along with PhonePe’s deep
insights and expertise as the market leader in Indian digital payments and its
extensive Pulse database to look at top digital payments trends in India.
India’s digital payments landscape
has witnessed a phenomenal growth over the past five years. As per the report,
India’s digital payments market is at an inflection point and is expected to
increase more than threefold from the current US$3 trillion to US$10 trillion
by 2026. As a result of this
unprecedented growth, digital payments (non-cash) will constitute 2 out of 3
payment transactions by 2026.
The
report also talks about how the digital payments ecosystem has been positively
disrupted by the entry of multiple new players with diverse offerings driving
digital payments adoption at scale. Leading global and Indian fintech players
have been key drivers of UPI adoption in India among end users, aided by
buildout of a large QR-code based merchant acceptance network, and further supported
by user-friendly interfaces, innovative offerings and an open API ecosystem.
The report goes on to list the levers for further
growth of digital payments in India which include - simplified customer
onboarding, continued push for consumer awareness, expanding merchant
acceptance, merchants getting greater access to credit, 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 launch, Karthik Raghupathy, Head
of Strategy, and Investor Relations, PhonePe, said, ‘’We are excited to partner with BCG to release Digital payments in
India: A $10 trillion opportunity. The report is an in-depth commentary on the
growth of digital payments in India and looks at factors and enablers that will
help unlock the massive growth potential
going forward. This report
is part of the PhonePe Pulse initiative, which was launched last year, in our
effort to give back to the Fintech ecosystem. PhonePe Pulse has been very well
received by all the key stakeholders in the ecosystem and has emerged as
India’s go to destination for insights and trends on digital payment in the
country.
Karthik
further added, “‘As India’s largest
Fintech platform we have seen the growth of UPI over the last few years. UPI has supercharged India’s transition to non-cash
payments when it comes to both person-to-person (P2P) and person-to-merchant (P2M)
transactions. Not surprisingly, UPI saw about 9x transaction volume increase in
the past 3 years, increasing from 5 billion transactions in FY19 to about 46
billion transactions in FY22: accounting for more than 60% non-cash transaction
volumes in FY22. This indicates that digital
payment has truly gained ubiquitous acceptance across the country. While Tier 1-2 cities have witnessed high acceptance
of digital payments, penetration in Tier 3-6 cities shows headroom for growth. The next wave of growth will now come from Tier 3-6 locations,
as evidenced in the past two years wherein Tier 3-6 cities have contributed to
nearly 60-70% of new customers for PhonePe.”
Prateek
Roongta, Managing Director & Partner, Boston Consulting Group said, “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.”
Prateek
further added,
“We will increasingly observe digital payments get embedded in all forms of
commerce, we will also witness the progression from embedded payments to
embedded finance. As more and more merchants begin to accept digital payments,
it will unlock a significant change in access to credit for small merchants due
to the creation of a digital transaction trail.”
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