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India Digital Payments Projected To Reach USD 10 trillion by 2026: PhonePe Pulse, BCG report

According to the report, the payments market is expected to grow threefold from the current size and account for 2 in 3 payments transactions by 2026

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As per a report published by digital payments company, PhonePe, in collaboration with Boston Consulting Group (BCG), India’s digital payments market is at an inflection point and is expected to increase more than threefold from the current USD 3 trillion to USD 10 trillion by 2026. This would translate to digital payments (non-cash) constituting 2 out of 3 payment transactions by 2026.

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

According to the report, simplified customer onboarding, continued push for consumer awareness, expansive merchant acceptance, merchants' access to credit, infrastructure upgrades, the setting up of a financial services marketplace driving growth in underpenetrated regions, Internet Of Things, 5G & a Central Bank Digital Currency CBDC will act as levers for further growth of digital payments. 

Commenting on the launch, Karthik Raghupathy, Head of Strategy, and Investor Relations, PhonePe, said, ‘’We are excited to partner with BCG to release Digital payments in India: A USD 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.

Raghupathy further added, “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 the past 3 years, increasing from 5 billion transactions in FY19 to about 46 billion transactions in FY22: accounting for more than 60 percent 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 percent of new customers for PhonePe.”

Prateek Roongta, Managing Director & Partner, Boston Consulting Group said, “India is set to become a digital payment economy as source of payments invert with 65 percent transactions being done digitally by 2026, as opposed to 40 percent 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.”

Roongta further added, “We will increasingly observe digital payments get embedded in all forms of commerce, we will also witness the progression from embedded payments to embedded finance. As more and more merchants begin to accept digital payments, it will unlock a significant change in access to credit for small merchants due to the creation of a digital transaction trail.”

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PhonePe Pulse PhonePe bcg digital payments