With a population of 140 crore, India is poised to become a global leader in digital payments, with households increasing non-cash transactions by 50 per cent, and 85 per cent of businesses in the country being digitally enabled by FY26, according to Redseer and Plural by Pine Labs.
The country accounts for more than 70 crore internet users, making it the second-highest number of internet users in the world after China. According to the report, the rise of first-time e-commerce users during the Covid years accelerated the adoption of digital payments.
Currently, Indian households make 35 per cent of their transactions digitally, with pay-to-merchant (P2M) accounting for a significant proportion of transactions. Customers use digital payment methods in 80 per cent of grocery, food delivery, and travel transactions. With mobile phones facilitating seamless P2M payments, digital transactions by households are estimated to cross 50 per cent by FY26.
Additionally, the country’s e-commerce market is estimated to expand from ₹4 lakh crore to reach ₹9 lakh crore by FY26, with customers from tier-2 and smaller cities driving most of this growth.
Businesses leveraging technologies for digital transmission
As more customers have adopted digital payments, businesses have also responded by leveraging technologies to enable digital transactions. The report estimates that 75 per cent of 7 crore businesses in the country are digitally enabled, and the number is expected to rise to 85 per cent by FY26.
“From the foundational work on the JAM trinity to the development of India Stack, India has quietly orchestrated a revolution in online payments. The future is increased tech-enabled digitization at the online and offline point of sale, and at Pine Labs, we are happy to be playing a part in it,” said B Amrish Rau, CEO, Pine Labs.
UPI captures the biggest share of the payments market, accounting for 84 per cent of the total digital payments volume as of FY23. BBPS, an ecosystem facilitating various bill payments, is set to witness a compound annual growth rate (CAGR) of approximately 30 per cent between 2023 and 2026.
According to Jasbir Juneja, Partner at Redseer, online shoppers in India are expected to grow by 50 per cent in the coming three years to reach 30 crore by FY26, further paving the way for the reach of online payments in the country.
Financial products and services such as embedded credit, embedded insurance, and embedded finance can increase business revenue, reduce the cost of customer acquisition, smooth customer journeys, and provide a competitive edge.
The RBI-conceptualised payment system BBPS driven by the National Payments Corporation of India (NPCI) finds a mention in the Redseer report. As per the Redseer findings, BBPS is poised to witness a 30 per cent increase in transaction volumes, increasing from 110 crore transactions in FY23 to 240 crore transactions by FY26.