Digital payments in India projected to reach $10 trn by 2026: Report

Smaller cities have recorded high acceptance of such transactions as cash use declines in country.

Digital payments in India will reach $10 trillion in value by 2026 from $3 trillion now, said a report on Thursday, forecasting that cash will increasingly be used less.

Digital payments (non-cash) will constitute two out of three payment transactions by 2026, said the PhonePe Pulse-BCG report called 'Digital payments in India: A $10 trillion opportunity'.

The report said the digital payments ecosystem has gained from the entry of multiple new players with diverse offerings driving digital payments adoption at scale. Global and Indian fintech players have been key drivers of UPI (Unified Payments Interface) adoption in India among end-users, aided by the buildout of a large QR-code based merchant acceptance network. This is further supported by user-friendly interfaces, innovative offerings and an open API ecosystem.

“UPI has supercharged India’s transition to non-cash payments,” said Karthik Raghupathy, Head of Strategy, and Investor Relations, PhonePe. “Not surprisingly, 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: accounting for more than 60% non-cash transaction volumes in FY22.”

This indicates that digital payment has gained ubiquitous acceptance across the country. While Tier 1-2 cities have witnessed the 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 per cent of new customers for PhonePe.”

“India is set to become a digital payment economy as a source of payments invert with 65 per cent transactions being done digitally by 2026, as opposed to 40 per cent transactions today,” said Prateek Roongta, managing director and partner, Boston Consulting Group. “Merchant payments will emerge as the most powerful driver of this growth, especially in the offline segment.”