ReportWire

Tag: DIGITAL PAYMENT

  • Swipe right: India’s love affair with digital payments

    Swipe right: India’s love affair with digital payments

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    Nearly 90 per cent of Indian consumers with internet access prefer digital payment options for online purchases, according to a report by Amazon Pay India and Kearney India. And this is true of small-town India as well.

    About 65 per cent of transactions by consumers in small-town India are now digital, while in larger cities this ratio was around 75 per cent, the report titled ‘How Urban India Pays’ noted.

    The survey spanned 120 cities, 6,000 consumers and over 1,000 merchants across India, and was conducted in the first quarter of 2024, at a time when regulatory action against some fintechs was at its peak.

    Nearly 5 per cent of the respondents preferred digital payments even for offline transactions. More than 85 per cent indicated a strong preference for digital payments for discretionary spending, such as for electronics, clothes and footwear.

    Affluent consumers lead the way with the highest degrees of digital payment usage [DDPU], tending to use various modes of digital payment for 80 per cent of their transactions. Meanwhile, consumers in the aspiring segment use digital payments for 67 per cent of transactions.

    Age, gender no bar

    Millennials and Gen X lead digital payments adoption, but the boomers are embracing digital wallets and cards at higher rates. Men and women both use digital payments in about 72 per cent of their transactions, indicating gender parity.

    While UPI reigns supreme with 53 per cent of consumers preferring it for online purchases, digital wallets and cards (credit, debit, and prepaid) are preferred by 30 per cent of consumers. Cash is still predominant in offline purchases, with 25 per cent of consumers preferring UPI and 20 per cent preferring digital wallets and cards. Co-branded credit cards, like the Amazon Pay ICICI credit card, are gaining momentum; 46 per cent of survey respondents reported owning at least one co-branded card, driven by their attractive rewards structure.

    Emerging modes like BNPL gain visibility as convenience, rewards propel India’s digital payment transformation, with 87 per cent awareness of the credit-based offering among respondents

    Ahmedabad, Pune, Indore, Jaipur, Lucknow, Patna, Bhopal and Bhubaneswar — despite their relatively lower retail potential compared to the top metros — demonstrate a digital payment adoption comparable to that of larger metros.

    Merchants drive change

    The study points out that 46 per cent of transactions for street vendors (paan shops, fruit and flower sellers, food stalls and kirana stores) are now digital. Digital modes of payment constitute around 69 per cent of the total transaction volumes for the Indian merchants surveyed.

    Across merchant types, the top reasons for preferring digital payments are convenience, trust, safety, and the ability to track transactions. About 63 per cent of the merchants admitted to accepting digital payments for transactions under ₹1,000 to prevent customers from going to competitors that accept digital payments.

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  • UPI transactions moderate from March peak to ₹19.6-lakh crore

    UPI transactions moderate from March peak to ₹19.6-lakh crore

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    Mumbai The Unified Payments Interface (UPI) saw both the number and value of transactions moderating by about 1 per cent on month from the record high seen in March 2024.

    Transactions worth ₹19.64 lakh crore were processed during April 2024, 0.7 per cent lower than the record of ₹19.78-lakh crore seen in the previous month. The value of transactions was 40 per cent higher compared with April 2023, as per data by the National Payments Corporation of India (NPCI).

    The end of a financial year traditionally sees a lot of transactions closer to the ₹1 lakh limit as a lot of merchants, business owners and individuals square off transactions leading to higher value and volume of transactions.

    The number of transactions on the UPI network fell 1.0 per cent to 1,330 crore during the month from the March peak level of 1,344 crore transactions. On year, the volume of transactions was 50 per cent higher. On-year growth in UPI transactions consistently remained over 40 per cent for the value of transactions, and above 50 per cent for volume of UPI trades in 2023 and FY24.

    “UPI volumes and value continue to grow on a year-on-year basis, reflecting the continued focus on digital adoption across the country and the customer convenience that UPI offers. The month-on-month reduction is not a comparable factor given that march is usually the month with higher volumes during the year,” said Vivek Iyer, Partner, Grant Thornton Bharat.

    In FY24, the UPI platform processed 13,115 transactions aggregating to ₹199.29-lakh crore compared with 8,376 crore transactions worth ₹139-lakh crore in FY23. In terms of the total transactions processed during the year, the volume of transactions was up 56.6 per cent whereas value of transactions was 43.4 per cent higher.

    UPI transactions are expected to breach 100 crore transactions per day by FY27, as per a report by PwC India, which projects UPI to dominate the retail digital payments landscape, accounting for 90 per cent of total transaction volumes over the next five years.

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  • Alternative payments drive 58% of e-commerce: Report

    Alternative payments drive 58% of e-commerce: Report

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    The e-commerce sector is witnessing a growth in the use of alternative payment methods, which accounted for nearly 58 per cent in 2023, according to a report by data and analytics company GlobalData. Mobile and digital wallets have eclipsed traditional payment modes, according to the report.

    Use of cash has fallen significantly, with an increase in preference for Amazon Pay, Google Pay and card payments, among other alternative options.

    Demonetisation effect

    “Alternative payments have gained huge traction in India since the demonetisation in 2016. The Covid-19 pandemic has accelerated this trend as both consumers and merchants preferred digital payments to avoid exposing themselves to disease vectors such as cash. The growing popularity of alternative payment brands among consumers and merchants also supported this trend,” said Ravi Sharma, Lead Banking and Payments Analyst at GlobalData.

    According to GlobalData’s 2023 Financial Services Consumer Survey, alternative payment solutions have consistently gained popularity in the last five years

    Payment cards are the second most popular e-commerce payment method in India, with a share of 25.7 per cent, with credit and charge being the preferred card types, accounting for 15.4 per cent in 2023. Cash, which is widely used for in-store payments in India, accounts for only 6.2 per cent share in online purchases.

    E-commerce growth

    The growth of India’s e-commerce market is supported by rising internet and smartphone penetration.

    India’s e-commerce market is projected to see a compound annual growth rate (CAGR) of 20.9 per cent, from $147.5 billion in 2024 to $315.5 billion in 2028. As per the Telecom Regulatory Authority of India, there were 881.3 million internet subscribers, up from 865.9 million in December 2022.

    According to e-commerce retailer Flipkart, the online shopper base in India is anticipated to increase to 400–450 million by 2027. In 2019, the company launched an initiative called Flipkart Samarth Programme to help small and medium enterprises sell their products online. As of December 2023, the programme has spread to 28 states across the country.

    “The uptrend in e-commerce sales in India is likely to continue over the next few years supported by the growing consumer preference, improving payment infrastructure, and growing popularity of alternative payment solutions,” Sharma added.

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  • UPI effect: Average ATM visits halve to 8 times a year

    UPI effect: Average ATM visits halve to 8 times a year

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    Every ₹1 increase in value of UPI (unified payments interface) transactions is leading to 18 paisa decline in debit card transactions, indicating a person is now making a visit to ATM on an average 8 times a year, down from 16 visits earlier, according to State Bank of India’s economic research report “Ecowrap”.

    The aforementioned observation is on the basis of monthly time series data analysis for the period of April 2016 to April 2023.

    Cash withdrawal

    Research by SBI’s economic research department (ERD) found that cash withdrawal through debit cards at ATMs has declined from November 2018, ceding way to UPI.

    “UPI has not only altered the payment landscape of India but is also significantly altering the purpose for which currency is used hitherto acting as investment to speculation (trading) conduit,” said Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI.

    ERD’s research suggests that rural and semi-urban areas are now accounting for 60 per cent of share in UPI value/ volume, dismantling the popular perception that metro/urban areas are hotbeds of digital payment adoption and innovations.

    Top 15 States accounted for about 90 per cent of share in value/volume.

    Among all, UPI has emerged the most popular and preferred payment mode in India pioneering Person to Person (P2P) as well as Person to Merchant (P2M) transactions in India accounting for about 73 per cent of the total digital payments, per Ecowrap.

    ERD’s analysis shows that the volume of UPI transactions has increased multi-fold from 1.8 crore in FY17 to 8,375 crore in FY23. The value of UPI transactions has also increased handsomely, from just ₹6,947 crore to ₹ 139-lakh crore during the same period, a jump of 2004 times.

    “Interestingly, CIC (currency in circulation) has moderated to reach 12.4 per cent of GDP in FY23, almost same level as 2015-16. The yearly growth in CIC has also declined to 7.9 per cent in FY23 from 16.6 per cent in FY21,” ERD said.

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