Digital Payments Is Unstoppable In India: 233% Growth Expected, Will Touch $10 Trillion Threshold By 2026!
A joint report by Unified Payments Interface (UPI) leader PhonePe and the Boston Consulting Group (BCG) predicts that the Indian digital payments ecosystem will nearly triple to $10 trillion by 2026 from the current $3 trillion.
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Future Forecasts
The jump will be led by growth in merchant payments that are expected to significantly digitise in the next five years, increasing from 20 percent digital penetration by value today to about 65 percent by 2026.
This means a 7x growth from $0.3-0.4 trillion digital merchant payments today to $2.5- 2.7 trillion by 2026.
The overall share of digital transactions will grow from 40 percent in 2021 to 65 percent in 2026, and will constitute two of every three payments in 2026.
Impact Of UPI
Karthik Raghupathy, Head of Strategy, and Investor Relations at PhonePe, said that 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.
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.
$1 Trillion Mark Crossed
It accounted for over 60 percent of non-cash transaction volumes in FY22.
UPI leader PhonePe alone enjoys a share of 47 percent in UPI volumes.
In the financial year 2021-22, UPI breached the $1-trillion mark in transaction values, a watershed moment for the indigenous payments system.
Next Wave Of Growth
Raghupathy said that Tier 1-2 cities have high acceptance of digital payments and penetration in Tier 3-6 cities shows “headroom for growth”.
He expects the next wave of growth to come from Tier 3-6 locations.
Also contributing to that growth will be factors such as expanding merchant acceptance, Infrastructure push and setting up of a financial services marketplace to drive growth in underpenetrated regions and digitised value chains.
Other Innovations
The report lastly says that upcoming tech innovations and upgrades including Internet of Things (IoT), 5G, and the RBI’s initiative of a Central Bank Digital Currency (CBDC) will further help increase adoption of digital payments.
Prateek Roongta, Managing Director & Partner of the Boston Consulting Group said that digital payments will start to get embedded in all forms of commerce.
“We will also witness the progression from embedded payments to embedded finance”, he added.
With more and more merchants adopting digital payments, it could lead to a significant change in access to credit for small merchants due to the creation of a digital transaction trail.
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