If there is one trend that has completely befuddled economy watchers in recent years, it is the tectonic shift towards the usage of digital payments in the country. India’s payments landscape has transformed in the past three-four years with exponential growth of the digital payments market.
Given the modest net penetration, low internet speeds, and sub-optimal usage of digital banking, India has not completely achieved freedom from cash, but the recent trend in digital payments is encouraging.
Leading the change are wallet companies, banks, telcos and e-commerce players. Several payment banks are also expected to soon join the fray.
There is clear optimism in the air as regards further growth of the digital payments market. Growth is only going to skyrocket over the next few years, given that smartphone penetration will only increase, and there will be greater access to the internet. And the already favourable regulatory environment will only improve in the coming days and ensure rapid development of payment infrastructure , say industry observers and experts..
Sample this projection from the recently released BCG-Google India report titled ‘Digital Payments 2020’. The report estimates that total payments on digital payments instruments in India will be in the range of $500 billion by 2020, up from an estimate of $50 billion now.
India’s digital payments industry could be worth $5 billion in revenues by 2020.
Mobile wallet companies such as Paytm, FreeCharge and MobiKwik have given banks some competitive fright, prompting the latter to join the race with their own electronic wallet offerings besides banking apps.
The number of unique activity wallet users, at 80-85 million, is already higher than the number of online banking users at 60 million. Wallet users are triple the number of credit cards issued, which stood at around 24 million in 2015-16.
The concentrated digital activity in the last three-four years has largely been spearheaded by the growth of prepaid instruments, especially wallets.
India’s ‘going digital’ strategy is crucial, as it will reduce cash-based transactions.
To reduce cash in the system, digital payments should be one-touch, easy and cost effective for the user.
It is expected that reducing cash in circulation and replacing it with digital payments will reduce enormous costs involved in manufacturing , storing and handling cash. This is apart from threat of counterfeits.
Glorious days are ahead on the digital payments front. So, fasten you seat belts and enjoy the action.
To reduce cash in the system, digital payments should be one-touch, easy and cost effective for the user.