PWC+印度支付手册2023-2027

May2023T

he

Indian

pay

mentshandbook

–2022

–2027PrefaceDearreaders,We

arepleasedtobringtoyouthethirdeditionof‘TheIndianpaymentshandbook’fortheperiod2022–2027.Likethepreviouseditions,thisyear’s

publicationfocusesonIndia’s

fast-growingdigitalpaymentsindustry.We

haveanalysedtheyeargonebyandcapturedthekeylearningsfortheindustryalongwiththeprogressmadebytheIndianpaymentsecosysteminthelastfewyears,keygrowthfactorsandemergingtrends.We

haveconsideredthechangeincustomer’shabitswhonowpreferdigitaltransactionsduetotheeaseofuse,well-builtdigitalpaymentsacceptanceinfrastructureandsecuretransactionflows.Basedontheinsightsgatheredfromourdiscussionswithkeystakeholdersinthisspace,wecoverthelatestdevelopmentsinthepaymentsspace,suchasregularisingthepaymentaggregatorspacebygrantinglicencestoentities,thelaunchofCentralBankDigitalCurrency(CBDC),productinnovationsbypaymentsystemoperators(PSOs)andpaymentserviceproviders(PSPs)whichhasexpandedtheusecasesoftransactingthroughdigitalpayments,introductionofmarket-drivenpricingmodelinaregulatedmannerforfewpaymentinstrumentsthathasfurtherenhancedthegrowthprospectsofthisindustryinIndia.Indiaisalreadyattheforefrontwhenitcomestodigitalpaymentsinnovationsacrosstheglobeandwiththeeffortsandinitiativesofkeystakeholders,suchasregulators,banks,payment/FinTechcompanies,cardnetworksandserviceproviders,weareconfidentthattheindustryisgoingtoseetremendousgrowthinthecomingyears.We

hopeyouwillfindthisreporttobeausefulandinsightfulread.Regards,MihirGandhiPartnerandLeader,

PaymentsTransformationPwCIndia2PwC

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TheIndianpaymentshandbook–2022–2027E

xecut

ive

summar

yIndiahasbecomeamodelfordigitalpaymentsadoptionforcountriesacrosstheglobe.Digitalpaymentsareoneofthemostimportantpillarsofafinanciallyinclusivecountryandhelpsinbringingpeopletogetherunderanorganisedfinancialsystem.Inthelasttwoeditionsofourreport,wefocussedonrevenuestreamsofdifferentpaymentinstrumentsandidentifiedareastoincreasetheuseoftheseinstruments.Inthisedition,weaimtodecodehowdifferentpaymentinstrumentsareevolvingandidentifysomeofthedevelopmentsinpaymentsspacewhichhavethepotentialtoactasacatalystforthefuturegrowthofthissector.DigitalpaymentsinIndiacontinuestogrowatamassiveratewitha

Y-o-Y

transactionalvolumegrowthof56%inFY2022–2023andisexpectedtogrowfourtimesbyFY2026–2027.ThisgrowthcanbeattributedtothepoliciesimplementedbytheGovernmentofIndiaandtheReserveBankofIndia(RBI)forpromotingdigitalpayments,theemergenceofFinTech

withnewtechnologiestoeaseuserexperienceandPSPsbuildinginfrastructuretosupportsmoothtransactionflows.Overthenextfiveyears,UPIisexpectedtoconstitutealmost90%oftotaltransactionalvolumeinretaildigitalpaymentsbyexpandingitsadoptiontoruralareasandtier3and4cities.Creditcard,nationalelectronictollcollection(NETC)andBharatBillPaymentSystem(BBPS)aresomeoftheotherinstrumentswhicharealsoexpectedtogrowatahealthyrate.Consumersareincreasinglyadoptingdigitalpayments.Withnewinnovationsandadditionsofnewusecases,Indiaisatthevergeofanotherboominincreaseddigitalpaymentstransactions.TheGovernmentandRBI’s

focusonregulatingthedigitalpaymentsecosystemisfuellingthegrowthinthedigitalpaymentsspace.UPIcontinuestomaintainitsincrediblegrowthstorywithaY-o-Y

growthintransactionvolumeof80%.InFY2022–2023,thetotaltransactionvolumewasalittleover83billionanditisexpectedtogrowfourtimesbyFY2026–2027.UPInowaccountsforover75%oftheoverallretaildigitalpaymentsinIndia.InFY2022–2023,theRBIlaunchednewfeaturesinUPIlikeUPI123Pay,

UPILite,creditcardlinkageonUPI,UPIonNREaccounts,UPIforforeigntouristsandsingleblockmultipledebitstofurtherincreasethescopeofUPIpaymentsandincreasethenumberofUPIusers.Amongstcards,whilecreditcardshada

Y-o-Y

growthof41%intransactionalvolumeinFY2022–2023,debitcardtransactionvolumegrewby6%duringthesameperiod.OneofthereasonsforaflatgrowthindebitcardvolumeistheshiftinpreferencetopayusingUPIsforface-to-facetransactions.CreditcardtransactionisexpectedtogrowinthecomingyearswiththelinkagetoUPIandnewentrantsenteringthecreditcardissuancespace.Theinfrastructureforface-to-facepayments,pointofsales(PoS)andQRhasalsobeengrowingnotonlyinmetrosandtier1citiesbutalsointier2and3cities.TheY-o-Y

growthofPoSmachinesandQRcodesisnearly31%and43%respectivelyinFY2022–2023.InnovationsinthisspacelikeTap-to-Pay,

soundboxhavealsopromotedtheuseofdigitalpaymentsbyenhancingtheuserexperiencewhilemakingpayments.3PwC

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TheIndianpaymentshandbook–2022–2027Table

of

contents1.Alookattheyeargoneby051025322.Anoverviewofthetoppaymentinstruments3.ThefutureofdigitalpaymentsinIndia4.Conclusion4PwC

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TheIndianpaymentshandbook–2022–20271.Alook

at

the

yeargone

byIn2022,thepaymentprocessingsectorledthemarketaccountingformorethanaquarteroftheworldwiderevenue.Thegrowingpopularityofe-commerceandtheshiftingfocustowardsquickpaymentsthroughouttheworldisforcingshopstoimplementpaymentprocessingsolutionstogivecustomersflawlesscheckoutexperiences.Thereisagrowthintheuseofdigitalpaymentswithover40%1

ofindividualsinmiddle-incomenations(excludingChina)makingin-storeoronlinepaymentsusingacard,phone,orinternetbankingforthefirsttime.Morethanonethirdofindividualsinalllowandmiddleincomenationspaidtheirpowerbillsfromaformalaccount.Globally,two-thirdsofindividualsmakeorreceivedigitalpayments,withdevelopingeconomiesincreasingtheirparticipationfrom35%in2014to57%by2021.2

Globally,FY2023hasalsoseeneconomic,politicalandgeographicalissueswhichhaveaffectedthefinancialindustry.Evolving

geopoliticalalignmentsamongcountriesTheremovalofRussiafromSocietyforWorldwideInterbankFinancialTelecommunications(SWIFT)andthesuspensionofoperationsbyinternationalcardschemeshaveservedasawake-upcalltotherestoftheworld.RussianassetswerefrozenbytheEU,theUSandtheUKwhoprohibitedtheircitizensandcorporationsfromdoingbusinesswiththem.Inresponsetothismove,theRussianCentralBankhasutiliseditsSWIFTcounterpart,theFinancialMessageTransfer

System(FMTS),whichwasformedintheaftermathofCrimea’s

2014incursion.However,

thevolumestransactedthroughthesystemarequitelesswhencomparedtotheoverallrequirementofRussia.ManyRussianresidentsstartedtransactingandinvestingincryptocurrenciestosafeguardtheirsavings,asthevalueoftheRublediminishedandthefinancialsystembecamemorerestrictedandvulnerable.ItsimpactwasalsoseenintheIndia–Russiatrade.To

dealwiththis,inJuly2022,theRBIputinplaceamechanismwheretradeinvoiceswillbesettledinINRandtheexchangeratewillbemarketdetermined.Butthisarrangementislimitedtotheimportofdefenseequipment.TherehavealsobeendiscussionsontheconceptofacommoncurrencyfortheBRICSnations(Brazil,Russia,India,ChinaandSouthAfrica).TheoutcomeofsuchamovecanaffectthedominanceoftheUSdollar.However,

globalacceptanceofthesameisstillamajorchallenge.TheconflictinUkraineandtherecentshiftinfocustowardsthecrisisbetweenChinaandTaiwan

mightbringchangesintheIndianpaymentssystem.1

/en/news/press-release/2022/06/29/covid-19-drives-global-surge-in-use-of-digital-payments2

/en/news/press-release/2022/06/29/covid-19-drives-global-surge-in-use-of-digital-payments5PwC

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TheIndianpaymentshandbook–2022–2027An

overviewof

theIndianpayments

Cards,mainlycreditcards,havemaintainedaconsistentcontributiontothegrowthofdigitalpaymentsinIndiawheretheincreasingnumberofphysicalacceptancelandscapepoints,expandinge-commerceuseandincreaseinInrecentyears,Indiahasrisentotheforefrontofawarenessaboutcreditcardshascreatedeasyaccessdigitalpaymentsbydevelopinganecosystemthatpointsfortheconsumerstousetheircreditcardsforfacilitatestheadoptionanduseofdigitalpayments.payment.CreditanddebitcardshavecontributedtoIncomparisontoothercountries,therateofadoption8.5%oftotaltransactionsvolumebutcontributedonlyofdigitalpaymentisveryhighandasaresult,many0.9%intermsoftransactionvaluewithamajorincreasecountriesareplanningtoreplicatetheecosystemsobservedinnumberofcreditcards.ThereasonbehindadoptedbyIndia.Digitaltransactionsareexpectedtothisisthatthegrowthpercentageofdebitcardhasshowagrowthof56%inasingleyearrisingfromINRstartedtoplateauwhilecreditcardshasincreaseddue71.97billioninFY21–22toINR112billioninFY22–23.3toalowtransactingbaseandcustomerpreferenceTheincreaseisduetothepaymentinfrastructuretowardsthemhasjustpickedupinthelastcoupleofimprovements,aresponsiveregulatoryframework,andyears.astrongeremphasisoncustomer-centricity.OwingtothecompetitioncreatedbyFinTechs

andtheservicestheyprovide,establishedbankshavebeenpushedtoconductresearchanddevelopbetterproducts.Withthehypearounddigitalpayments,growthinofflinepaymentsysteminfrastructurehassloweddown,especiallyforATMs.

Eventhoughcashincirculationhasincreasedby28%tillMarch2022fromMarch2020,ATM

infrastructurehasincreasedbyonly2%.Thisisbecauseofthehighmaintenancecostincomparisontotherevenuegeneratedbythem.AmajorshiftwasseentowardsmicroATMs

in2022.AccordingtoRBIfigures,thereare14.19lakhmicroATMs

inthecountryasofDecember2022.5UPI’s

popularityhasgrowntothepointthatpeer-to-merchant(P2M)transactionssurpassedpeer-to-peer(P2P)transactionsintermsofvolume.ThoughUPItransactionsvolumecontributed63.4%ofthetotaldigitalpaymentinFY21–22,thetotaltransactionvaluecontributedonly16.1%ofthetotaldigitalpaymentswhichhintsthattheticketsizeofthetransactionsislower.

UPIwhichwasprimarilyusedforP2Ptransactions

Thefocusoftheindustryhasshiftedtowardsnewhastransitionedtowardsperson-to-person-mobile(P2PM)andP2Mtransactions.Growthinmobileapp-basedpaymentsisanotherindicatoroftheaffinitytowardsdigitalpayments.InFY2022–23,thenumberoftransactionshasgrownby80%from46billionto83billionwithanincreaseinthetransactionvalueby64%.ThisgrowthintransactionvolumeshasbeencomplementedbygrowthinQRcode-basedpaymentinfrastructurei.e.UPIQRandBharatQRby43.5%.UPItransactionvolumesarepredictedtogrowinthefutureatacompoundannualgrowthrate(CAGR)of42%and30%inthecaseofthetransactionvalue.4developmentslikeDigitalRupeeand5Gwhichwillboostdigitalpaymentsystemsinthecomingyears.Theseinnovationshavecreatedanopportunityfornewplayerstocomeinwithinnovativeproductswhichwillfurtherboostcustomerexperience.3

.in/Scripts/PSIUserView.aspx?Id=214

.in/Scripts/PSIUserView.aspx5

.in/Scripts/PSIUserView.aspx?Id=196PwC

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TheIndianpaymentshandbook–2022–2027Investment

inFinTechPoliciesandregulationssupportingdigitalpaymentsFundinginIndianFinTechs

hasdrasticallyreducedtoUSD5.5billion(approx.)in2022,ascomparedtoUSD10billion(approx.)in2021.6

Thefundinginflowin2023isexpectedtodecreasefurtherthisyear.Someofthereasonsforthedeclineinfundingare:AnumberofinitiativeshavebeentakenbytheGovernmentandtheRBIinthedigitalpaymentsspacethisyear.

TheRBIisfocusedtoregulateandstreamlinetheentirepaymentsecosystemtosecuretheend-consumerandalsolaythepathforfurthergrowthindigitalpaymentsadoptioninthecountry.

To

makethisindustrymoreinclusiveandtobetterunderstandtheconcernsandgrowthprospects,theRBIcontinuouslyreleasesconsultationpapersthroughwhichitintendstounderstandtheperspectiveofthevariousstakeholders.Forthefirsttime,theRBIconductedtwoindustryworkshopsanddiscussionswithIndianFinTechs

inFY2022–2023,heldinKashmirandKochi,wheretheRBIandparticipantsdeliberateduponvarioustopicsandthediscussionswerelaterformalisedintopoliciesandnotifications.SomeofthekeyinitiativestakenbytheRBIinFY2022–2023havebeengivenbelow:1.Globaleconomicslowdownandchangesintheeconomyofsomecountries2.IntroductionofregulationsbytheRBIforFinTechsalongwithguidelinestostreamlineandbettermonitorthesectorduetoincreasingcasesoffraudandmalpractice3.TheRBI’s

regulationonrestrictingnon-banksfromloadingprepaidpaymentsinstruments(PPIs)throughcreditlines–thishashighlyimpactedthebuynowpaylater(BNPL)industry,whereplayersareeitherinnovatingtheirproductfeaturesorshiftingtowardsotherdigitalproductsUPI123PAY:

TheRBIlaunchedUPI123PAY

inMarch20227

toenablefeaturephoneuserstomakepaymentsthroughUPI.Thiswillenable400millionfeaturephoneuserstoadoptdigitalpayments.4.ShiftinevaluatingFinTechs

fromgrossrevenuetonetprofitandnotconsideringthenumberofcustomersorloansdisbursed.DigiSaathi:InMarch2022,theRBIandNPCIlaunchedDigiSaathi8

–a24x7helplinewithawebsite,chatbotsandtoll-freecalls,whichaddressesuserqueriesandsharesinformationaboutalldigitalpaymentproductstoincreaseawarenessofdigitalpayments.Withthehelpoftechnologieslikeartificialintelligence(AI)andblockchain,FinTech

isnowevolvingandaimstounderstandconsumerFrameworkforgeo-taggingofpaymentsystemtouchpoints9:InMarch2022,theRBIissuedaframeworktocapturegeo-tagginginformationofpaymentsystemtouchpointsprovidedbybanksandnon-bankspaymentserviceoperators.ThesameinformationneedstobereportedtotheRBItohelpthemmonitorandunderstandthepenetrationofdigitalpaymentdevices.behaviourandoffernewproductscustomisedtotheirrequirements.FinTechs

arebeingdirectlyregulatedbytheRBIandareanintegralpartofRBI’secosystemnow.

Thereisalsoariseinthenumberofcollaborationsbetweenbanks,non-bankfinancialcompanies(NBFCs)andFinTechs.

Thishasresultedinexploringnewsegmentslikewideningtargetedcustomersegments,supplychainpaymentsandcross-borderpayments,wheredigitalpaymentshelpconsumersaddressexistingpainpoints.Masterdirection–creditcardanddebitcard–issuanceandconductdirections,2022:InApril2022,theRBIreleasedmasterdirectionsforissuerstoregulatetheissuanceandconductofcredit,debitandco-brandedcards.Theseguidelinesaimtofurtherimprovecardsecurityandensurethatpropercommunicationissharedwiththecardholders.Banonnon-bankPPIsloadingthroughcreditlines10:InJune2022,theRBIissuedanoticetonon-bankPPIissuerstonotloadtheirwalletsandcardsthroughcreditlines.ThishasimpactedtheBNPLindustryasmostnon-bankBNPLserviceprovidersandPPIissuerswereallowingcustomerstoloadtheirwalletsthroughcreditlines.789.in/Scripts/BS_PressReleaseDisplay.aspx?prid=53385.in/Scripts/BS_PressReleaseDisplay.aspx?prid=53385.in/scripts/NotificationUser.aspx?Id=12260&Mode=06

/tech/startups/2022-year-in-review-fintec.h-firms-gear-up-for-tumultuous-ride-in-2023/articleshow/96500512.cms?from=mdr10

/business/rbi-stops-non-bank-ppi-issuers-from-load-ing-wallets-cards-via-credit-lines/article65550360.ece7PwC

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TheIndianpaymentshandbook–2022–2027UPILite11:TheRBIlaunchedUPILite,anon-devicewallet-basedUPIsysteminSeptember2022.Throughthis,userscanloadmoneyuptoINR2,000intheirwallet,whichcanbeusedtomakepaymentsinofflinemode.ThiswillassistuserstomakeUPIpaymentseveninplaceswhichhavelowornointernetconnectivity.Tw

oexamplesofdevelopmentsofpromotingdigitalpaymentsinothersectorsare:NationalLogisticspolicy:Inordertobettermanagethelogisticssector,

theGovernmentofIndiaplanstoregulariseit.Presently,

thelogisticssectorismostlydefragmentedandhasamarketsizeofINR160billion.16TheGovernmentaimstobringallstakeholdersinthelogisticssectorunderasingleplatform–theUnifiedLogisticsInterfacePlatform(ULIP).Amongotherthings,thisplatformwilldigitisemostofthefinancialtransactionsinthissectorresultinginincreaseddigitalpayments.LinkingRuPaycreditcardstoUPI12:InSeptember2022,theRBIannouncedthelinkageofRuPaycreditcardstoUPI.Thiswillincreasetheadoptionofdigitalpaymentsandbenefititsstakeholdersduetothefollowingreasons:•

lackofPoSmachinesinruralareas•

increaseincreditcardusageONDC:OpenNetworkforDigitalCommerce(ONDC)isanecosystemthroughwhichthee-commerceindustryisgoingtoberevolutionisedbymovingoutofamarketplaceorplatform-basedmodel.ONDCwillenablesmallmerchantsandlocalretailerstobuildtheirbusinessesonline.Presently,

theIndiane-commerce•

Earningstopaymentfacilitatorsbychargingmerchantdiscountrate(MDR)tomerchantsforallUPItransactionsmadethroughcreditcard•

increaseinsalestomerchantsasconsumptionisexpectedtoincrease.marketpenetrationisaround8%whichONDCaimstoincreaseto25%byFY2024–2025.17Inward,cross-borderremittancethroughBBPS13:InSeptember2022,theRBIlaunchedBBPScross-borderpaymentsforinwardremittance.Thiswillhelpnon-residentindians(NRIs)tonowpayutility,

water,

andConsumerbehaviourcomplimentstelephone-relatedbillsdirectlyfromtheirmobilephones.

policyimplementationsBBPSopenforallcategoriesofpaymentsandIndiahascomealongwayintermsofdigitisationwithcollections14:InDecember2022,theRBIenabledbothrecurringandnon-recurringpaymentsandcollectionsinallcategories.Thiswillenablepaymentslikeeducationfees,taxpaymentsandrentcollections,tobemadethroughBBPS.technologicalandpublicpolicyinterventionsandanecosystemfortheacceptanceofpaymentsystemsinIndia.Consumerbehaviourhasevolvedanduserexperience(UX)whileusingthepaymentsystemhasgainedmoreimportance.ThisbehaviouralchangehasalsobeenattributedtotherapidadoptionofdigitalPaymentmandateinUPI15:InDecember2022,theRBIenabledpaymentmandatesinUPI.Withthisfeature,UPI

payments.DigitalpaymentsusersnowprefertopayuserscanblockmoneyintheirUPIlinkedaccountsforspecificmerchants,whichcanbelaterpaidinmultipledebits.digitallyformostdailytransactionsforbothsmallandbig-ticketvalue.Consumershavemovedfromtheeraofcashbackoffersasusingdigitalpaymentmethodshasbecomemoreofahabit.To

monitortheextentofdigitisationofpaymentsinIndia,theRBIhasconstructedaDigitalPaymentsIndex(DPI)inJanuary2021withMarch2018asthebaseperiodwithaDPIscoreof100.TheDPIscoreincreasedbyapproximately30%and29%intheyear2020–2021and2021–2022respectivelywhencomparedto2019–20and2020–21respectively.18CBDC:TheRBIlaunchedapilotprojectforbothretailandwholesalesegmentson1December2022,withinaclosedgroup.TheRBIwilltakeaphase-wiseapproachforthepilot,startingwithfourbanksoutoftheeightshortlistedbanks.ThedigitalcurrencywilloperateforbothP2PandP2Mmodels.11

/business/rbi-stops-non-bank-ppi-issuers-from-load-ing-wallets-cards-via-credit-lines/article65550360.ece12

/news/india/how-will-rupay-credit-cards-linkage-upi-lite-bharat-billpay-cross-border-payments-help-customers-11664080427946.html16

.in/press-releases/national-logistics-policy-will-be-re-leased-soon-policy-to-create-a-single-window-e-logistics-market-will-generate-employment-and-make-msmes-competitive-nirmala-sitharaman/13

.in/scripts/NotificationUser.aspx?Id=12386&Mode=014

/business/rbi-monetary-policy-upi-will-now-allow-blocking-money-for-multiple-debits-bbps-to-include-all-payments-news-24299817

/companies/news/what-is-ondc-india-s-project-for-an-open-e-commerce-network-11654097068290.html15

/business/rbi-monetary-policy-upi-will-now-allow-blocking-money-for-multiple-debits-bbps-to-include-all-payments-news-24299818

.in/rdocs/PressRelease/PDFs/PR602D-PI147FB19811794BBB8CCBF29AF13B09CA.PDF8PwC

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TheIndianpaymentshandbook–2022–2027Increaseintheacceptanceofdigitalpayments:AsperRBIdata,therehasbeenanincreaseofover500%intheacceptanceofdigitalpaymentbymerchantsfortheperiodApril2021toSeptember2021comparedtotheperiodOctober2018toMarch2019.19

Inthesameperiod,UPIpaymentshaveincreasedbymorethan1200%.Digitalpaymentshaveincreasedby216%inthemonthofMarch2022ascomparedtoMarch2019.20

Paperinstrumentusage,ontheotherhand,hasdecreaseddramaticallyduringthesameperiodwithitsproportionoftotalretailpaymentsfallingfrom3.83%to0.88%intermsofvolumeandfrom19.62%to11.47%intermsofvalue.An

increaseinthesalariedemployeescustomerbaseIncomparisontoFY2020–21,thenumberofcreditcardshasincreasedby19%andthetransactionvolumehasincreasedbymorethan1.5timesinFY2021–22.ThetrendhascontinuedinFY2022–23asperthedatasharedbytheRBI.FinancialliteracyroseaftertheCOIVD-19pandemicandcustomersarenowmorelikelytorelyoncreditcardsforshort-termloanratherthanpersonalloans.Theexpansionofbusinessintier2and3citieshaveincreasedthesalariedcustomerbase,andthenewcompetitiveproductpropositionsincreditcardshavedriventheadoptionofcreditcardsinthemarket.InfluenceofpaymentbehavioursofGenZandmillennialsinthegrowthofdigitalpayments:MillennialsandGenZareexpectedtoform50%ofthecountry’spopulationby2030.Thesetech-savvyindividualsspendovertwohoursonlineperday.

Theseagegroupshaveafasteradoptionofdigitalpayments,unlikeGenXwhostillprefercashtransactions.Atpresent,GenZholdsover30%oftheoveralldigitaltransactionshare.21E-commercecontinuestogainmomentum:Anotherchangeinconsumerbehaviouristhemovefromlocalretailerstoonlinee-commerce.E-commerceplatformshaveseenahugeincreaseintheirsalesduringthisperiod,speciallyfromtier2totier4cities.Manylocalretailershavealsomovedtheirbusinessonlineandnowoffertheirservicesinthee-commercespace.Someofthemainreasonsforthischangeare:1Multipleoptionsofproductsononlineplatformsfortheconsumers52ChangeinPositivewordofmouthbehaviourofconsumerstobuyonline43EaseofSafe,secureandeasydigitalpaymentoptionsonlineshoppingandquickhomedelivery19

.in/Scripts/PublicationVisionDocuments.aspx?Id=120220

.in/Scripts/PublicationVisionDocuments.aspx?Id=120221

/news/fintech/millennials-at-fore-front-of-online-finance-products-contribute-44-of-total-lending-report/973088209PwC

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TheIndianpaymentshandbook–2022–20272.An

over

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oft

he

top

pay

mentinst

r

umentsAlthoughtherehasbeenapreferenceforcashtransactionsinIndia,UPIhasgainedpopularityandisencouragingacultureofdigitalpayments.Theshareofdigitaltransactionshasincreasedfrom11.26%inFY16to80.4%22

inFY22.Theriseofdigitalpaymentoptionshascontributedtothisshiftinconsumerbehaviour.

Customerscanmakepaymentsatanytimeandfromanylocationusingavarietyofpaymentoptions,includingnetbanking,UPIpayments,creditcards,debitcards,ande-wallets.Theshiftcanalsobeattributedtothegrowingacceptanceofdigitalpaymentsbyretailers.Future

possibilitiesfor

growthTheIndiandigitalpaymentsindustryhasbeenexpandingsteadilyinthelastfiveyearsataCAGRof50%transactionvolume-wiseand60%transactionvalue-wiserespectively.TheGovernmentofIndiaandtheRBI’s

effortstomakeIndiaadigitalpayments-firstnationisoneofthereasonsforthisincrease.Newplayersandevolvingpaymentsystemsinthemarketareenhancingtheuserexperiencebyofferingquickerdigitalpaymentsandprovidingauniqueuserjourneytomakeittheirpreferredpaymentmethod/partner.Thisapproachhasincreasedtransactionvolume,particularlyinmetropolitanandsemi-urbanregions.Thereachinruralregionshasalsoincreaseddueoftheavailabilityofinfrastructureandthewillingnessofthemassestoadoptdigitalpaymentmethods.22

https://timesofi/business/india-business/power-of-digital-transactions-currency-in-circulation-declines-in-diwali-week-for-1st-time-in-20-years/article-show/95276968.cms10

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TheIndianpaymentshandbook–2022–2027Figure1:

Overalldigitalpaymentsmarket**NationalElectronicToll

Collection(NETC)isanotherconsistentcontributortothedevelopmentofdigitalpayments,growingataCAGRof110%inthelastfiveyears.ThereasonbehindthisistheeaseofobtainingandusingaFASTag

whichsavescustomerstimewhiletravelling.Transactionvolume(inbillion)411309Letuslookatsomeofthedigitalpaymentinstrumentsindetail:226156A.

UPI10364PaymentsthroughUPIgrewatarateof80%fromthelastfinancialyear.

InFebruary2023,23

UPIaccountedforover75%transactionvolumeoftheoverallretaildigitalpaymentsinIndia.AsperPwC’s

analysis,itisestimatedthatUPIwillrecord1billiontransactionsperdaybyFY2026–2027.AsuserscontinuetoincreasinglyoptforUPIforsmall-valuetransactions,theaverageticketsizehasseenadecline.ByendofFY2022–23,itisexpectedthatthevolumeofP2MtransactionswillsurpassP2PtransactionswithP2Maccountingfor52%oftheoverallUPItransactionvolume.Transactionvalue(intrillion)518418333Figure2:

TransactionvolumeofUPI(in

billion)241166106379.72281.28200.91133.9483.7146Source: