Digital payments in India. A $10 trillion opportunity.
Spocto X (A Yubi Company)
Simplifying collections with innovation at its core, ensuring superior customer experience
Digital payments in India projected to reach $10 trillion by 2026
Based on PhonePe and Boston Consulting Group (BCG) report, Digital payments in India will breach the $10 trillion mark by 2026. Presently, the value of digital transactions in India stands at $3 trillion. Indeed, people will continue to make cash payments, but digital payments will constitute a significant chunk of transactions in India in the coming years.
Digitization made a significant impact on banks as well as debt collection agencies. Digital banking has become the new norm now. Recently McKinsey conducted a survey that included banks, lenders, and credit card users who had recently faced the brunt of delinquency. The survey aimed to understand which channels banks used to contact customers, the outcome per channel, and what channels customers preferred to be contacted on. The result showed that online banking as a communication channel was used by only 2% of the lenders even after the rise in digital in recent years. A higher percentage of debt was recovered through digital channels like online banking, SMS and push notifications. In contrast, non-digital methods got the most inconsequential positive results.
The other main findings of the PhonePe-BCG report are discussed below:
? The share of the popular digital platforms for making payments is as follows: PhonePe (46%), Google Pay (34%), Paytm (14%), and other banks & TPAPs (6%).
? Predictions abound that two out of three transactions will go digital by 2026.
? The entry of several new players with attractive offers is driving more and more people to make digital payments.
? Another driving factor for people to adopt UPI (Unified Payment Interface) services in India is the active participation of Indian and global fintech organisations.?
? A well-structured QR-code network is also contributing to the continual rise of digital payments.?
? Among other drivers of this rising digital payment trend in India are user-friendly interfaces and an open Application Programming Interface (API) system.
? As of now, 40% of total transactions in India are digital. Also, 2021 saw transactions to the tune of $3 trillion being processed by digital channels. This figure does not account for payments made to government agencies, corporate houses, and financial service companies.
? The Unified Payments Interface (UPI) market continues to grow, with transactions touching the 5 billion mark and ten crores in value. Thanks to UPI, instant money transfers are ensuing seamlessly.
? Efficient UPI services have facilitated India’s transformation to a largely non-cash economy. Here, digital payments mainly include low-value merchant (P2M) payments and person-to-person fund transfers.
? UPI services recorded a nine-fold rise in transaction volume in the past three years. Transactions from five billion in the year 2019 went up to approximately 46 billion in the year 2022. In all, UPI services accounted for over 60% of non-cash transaction volumes in the year 2022.
? UPI services will grow to about 73% of all digital payments by 2026.
? Quick-response (QR) codes play a significant role in expanding digital payment services in India.
? Over 30 million nationwide merchants have adopted QR-code payments. This figure has grown from 2.5 million merchants five years ago.
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? When it comes to the total P2M transaction volumes via UPI, the growth has been steep. There has been an increase from 12% in 2018 to 45% in 2021. Indeed, this market is expected to go up further.?
? Merchant payments will contribute majorly to the rise in digital prices, particularly in the offline market. They will digitise to a large extent in the coming five years. Their share in the digital payments market will increase from 20% as of today to approximately 65% by the year 2026. The digital merchant payments market will grow 7seven times from the $0.3-0.4 trillion range to the $2.5- 2.7 trillion window by 2026.
? With more stores adopting QR codes, offline payments will account for about 75% of all digitised costs in the years ahead.
? Among bottlenecks in accepting digital payments are UPI outages, frauds, and know-your-customer ((KYC) norms.
? The main bottleneck discouraging merchants and customers from registering on digital platforms and e-wallets is KYC norms. Although digital KYC channels are offline (OKYC) and video-based (VKYC), people are still hesitant to join the KYC bandwagon. A full KYC entails a video or physically touching biometric devices.
? Other factors plaguing the fast-growing UPI ecosystem are scalability issues, bank infrastructure, and technical glitches. The general recommendation for banks to solve their limited scalability problems is to seek other options (such as Cloud-based ones) outside the purview of core banking.
? As per the national average, the banks and UPI-administering body, National Payments Corporation of India (NPCI), experience approximately 1.4% of technical issues during UPI transactions. The high transaction volumes are cited as the cause of network and system issues.
? The consensus is that digital payments are mainly acceptable to people across the country. Whereas Tier 1-2 cities are widely accepting digital payments, there is much room to cover concerning the penetration in Tier 3-6 cities. These cities have contributed close to 60-70% of the new client base for PhonePe. And, they are projected only to increase their share in digital payments in the future.
Digitising debt collection is not optional anymore.
Rising economic issues have increased the number of debtors and delinquents. Digitising debt collection is not optional anymore. It has become a necessity. Consumers today are primarily available on digital channels because of the overall penetration of smartphones and the ease of access to the internet in rural and urban areas. Banks and lenders have to adapt to this and transition to digital methods.
Digitising debt collection is easy to implement these days. Spocto X (A Yubi Company) offers plug-and-play solutions that banks can implement and adapt to quickly. With its AI and ML-led technology and personalised campaigns to reach customers at the right place, right time, with the proper context without using calling and field agents. We ensure that banks have complete control over their entire debt cycle.
Sources:
https://www.business-standard.com/article/economy-policy/digital-payments-in-india-projected-to-reach-10-trn-by-2026-report-122060201089_1.html
https://economictimes.indiatimes.com/tech/technology/indias-digital-payments-market-will-triple-to-10-trillion-by-2026-phonepe-bcg-study/articleshow/91963637.cms
https://www.phonepe.com/pulse-static-api/v1/static/docs/PhonePe_Pulse_BCG_report.pdf
https://www.timesnownews.com/business-economy/industry/in-focus-indias-digital-payments-revolution-article-92028237