Digital Payments in India expected to reach $7 trillion by 2030
Digital Payments in India expected to reach $7 trillion by 2030
Study reveals rapid growth and changing consumer behaviours.
With digital adoption rapidly increasing, India’s retail digital payments are expected to double to $7 trillion by 2030 from current levels, according to a study. The report, “How Urban India Pays,” highlights the strong adoption of digital payments. It states about not only online purchases that are potentially causing a permanent shift in consumer behaviors. It also in addition covers that digital payment is also driving offline adoption.
The study revealed that 90% of survey respondents prefer digital payments for online purchases. Affluent consumers are leading the way, using various modes of digital payment for 80% of their transactions. It was noted that Millennials and Gen X are the primary adopters of digital payment instruments, and there is gender parity with men and women using digital payments in about 72% of their transactions.
The research was based on an online survey of over 6,000 consumers and more than 1,000 merchants across 120 cities, encompassing various regions, income groups, city categories, age brackets, and genders. India has seen a surge in e-commerce, with the market valued at $75 billion to $80 billion in 2022, expected to grow at a 21% CAGR until 2030.
“In line with India’s digital journey, retail digital payments have grown dramatically over the past five years—from $300 billion in FY18 to $3.6 trillion in FY24. By FY30, they are likely to double to $7 trillion,” the report said. The Unified Payments Interface (UPI) has been a significant driver of this growth, showing a CAGR of 138% in its volumes from FY18-24. Other instruments, such as cards and digital wallets, are also becoming increasingly popular, contributing 10% of digital transaction value today.
India is a global frontrunner in the digital payment landscape, accounting for 46% of the global digital transaction volumes in 2022. Digital payments have penetrated small towns, with 65% of transactions being digital, while in larger cities, this figure is 75%.
The report also highlights a correlation between a city’s average Degree of Digital Payment Usage (DDPU) and its retail potential. The top six metros are showing both high DDPU and high retail potential. Some cities like Lucknow, Patna, Bhopal, Jaipur, Bhubaneswar, Indore, Ahmedabad, and Pune have a high DDPU comparable to larger metropolitan cities despite lower retail potential.
Co-branded credit cards are gaining momentum. However, emerging methods such as buy now, pay later (BNPL), wearable payments and voice assistant-based payments are also starting to make inroads. Digital modes of payment constitute around 69% of the total transaction volumes for the surveyed Indian merchants. Even street vendors such as paan shops, fruit and flower sellers, food stalls, and kirana stores are adopting digital payments.
The report identifies challenges for merchant adoption, mirroring consumer concerns, with issues like financial fraud, limited connectivity, and trust. The next wave of growth in digital payments will come from increasing penetration in segments with lower DDPU, such as lower-income groups and smaller towns. They are also now enhancing spending via digital modes in higher DDPU segments by addressing their concerns.
All key stakeholders, including payment providers, the government, and value-added services players, will need to expand digital payment adoption. The focus should be on financial education, launching targeted programs to boost awareness of digital payments, and new methods like UPI Lite and UPI Lite X, especially for aspiring consumer segments, women in small towns, and street commerce merchants.
Additionally, it is crucial to create user-friendly consumer journeys by streamlining documentation and know-your-customer (KYC) processes, optimizing user interfaces and establishing responsive customer complaint resolution mechanisms. Enhancing digital infrastructure by addressing system and network issues and exploring innovations such as UPI Lite X for areas with limited internet is also essential.
Furthermore, minimizing the risk of fraud and expanding access to credit-based payment methods by using alternative data for underwriting risk, developing innovative credit products and promoting credit education for financial health are necessary steps. These efforts can help India overcome challenges in the digital payment ecosystem, fostering a more inclusive, secure, and user-friendly environment thereby, increasing the adoption of digital payments among consumers and merchants in India.
