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Digital payments in India set to triple in 4 years finds BCG-PhonePe study

June 2, 2022:  The Indian digital payment industry projected to reach $10 trillion by 2026 find a study by  digital payments company PhonePe with the  Boston Consulting Group (BCG).
It suggests that India’s digital payments market is at an inflection point and is expected to more than triple from the current US$3 trillion to US$10 trillion by 2026 (excluding large B2B/ G2B payments). As a result of this unprecedented growth, digital payments (non-cash) will constitute 2 out of 3 payment transactions by 2026 with contributions from across India.
The report  says the digital payments ecosystem has been positively disrupted by the entry of multiple new players with diverse offerings driving payments at scale, and niche players offering financial services such as credit, wealth management and insurance.  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 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  suggests how IoT, 5G & CBDC will provide further impetus to growth.

Says Karthik Raghupathy, Head of Strategy, and Investor Relations, PhonePe: ‘’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.
He adds: “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 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.”
Adds Prateek Roongta, Managing Director & Partner, Boston Consulting Group: “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.”

Link to the report here