The digital payments landscape in India has experienced rapid growth over the past decade, and it is expected to continue evolving in the coming years. In this article, we will explore the key predictions for the future of payments in India based on a report by NTT Data Payment Services. These predictions shed light on the trends and developments that will shape the payment industry and provide valuable insights for businesses and consumers alike.
The Rise of UPI: Unlocking the Potential of Digital Transactions
The Unified Payments Interface (UPI) has been a transformative force in India’s digital payment ecosystem. UPI facilitates instant fund transfers between bank accounts through mobile devices, making transactions quick, convenient, and secure. The report predicts that UPI will continue its exponential growth and dominate digital transactions in India. With the support of major banks and payment apps, UPI is expected to facilitate over half of all digital payment in the country by 2024. The National Payments Corporation of India (NPCI) aims to double the monthly UPI transaction volumes to 15-20 billion, indicating the widespread acceptance and adoption of UPI among businesses and consumers.
The Unified Payments Interface (UPI) continues to revolutionize peer-to-peer (P2P) transfers, with over 22.7 billion transactions worth $768 billion in 2023. It’s projected to facilitate over half of all digital payment in India by 2024, with the National Payments Corporation of India (NPCI) aiming for 15-20 billion monthly transactions.
Pay Later Services: Revolutionizing the Way Indians Shop Online
Pay Later services have gained significant popularity among young urban consumers in India. These services allow users to make online purchases and defer payment, often with interest-free credit. Major players in this space, such as LazyPay, Simpl, and ZestMoney, are expanding their merchant networks and targeting smaller cities. The report suggests that by 2024, over 50 million Indians will be using Pay Later services for online and in-store purchases. This emerging payment option is expected to capture a substantial share of e-commerce payments, providing consumers with greater flexibility and convenience in managing their finances.
These are gaining popularity, especially among young urban consumers. By 2024, over 50 million Indians are expected to use Pay Later services for online and in-store purchases, potentially capturing 15-20% of e-commerce payments.
Contactless Payments: Embracing Convenience and Safety
Contactless payment have gained momentum globally, and India is no exception. The report highlights the increasing adoption of contactless payment methods, including NFC-enabled cards, wearables, and mobile wallets. Contactless payment offer a seamless and hygienic payment experience, especially in the context of ongoing concerns about health and safety. The report predicts that by 2024, contactless payments will become even more prevalent in specialized use cases, such as transportation, retail, and hospitality. This trend reflects the evolving consumer preferences for convenient and secure payment options.
Digital Wallets: Consolidation and Innovation for Enhanced User Experience
While UPI continues to dominate the digital payment landscape, digital wallets are also playing a significant role. Players like Paytm, Google Pay, and PhonePe have expanded their offerings beyond basic payments, integrating additional features such as stock trading and commerce. The report suggests that digital wallets will consolidate their market share by forming strategic partnerships with merchants, banks, and other fintech companies. By leveraging these partnerships, digital wallets aim to provide users with a comprehensive and seamless payment experience. The report predicts that by 2024, the top three digital wallets may hold over 80% of India’s digital payments market, offering users a one-stop platform for various financial transactions. While UPI grows, digital wallets are focusing on optimizing their proposition around value-added services. They are expected to consolidate their share in the digital payments market.
Regulatory Developments: Balancing Innovation and Consumer Protection
Regulatory developments play a crucial role in shaping the payments industry. The report emphasizes the need for progressive regulations that balance financial inclusion, competition, and data security. The Reserve Bank of India (RBI) is expected to introduce new regulations in 2024, focusing on areas such as data sharing, open banking APIs, payment aggregators, and international remittances. These regulations aim to drive responsible innovation while ensuring consumer protection and data privacy. However, the report acknowledges that there may be temporary friction around compliance as businesses adapt to these new regulations. A progressive regulatory approach will be crucial in fostering the sustainable growth of the payments industry while safeguarding the interests of all stakeholders.
Account Aggregator Framework:
Launched in 2021, this framework is expected to deepen open banking integrations, fuel fintech innovation, and enable value-added services like personal financial management tools as more Account Aggregators receive final RBI approvals in 2024.
The future of payments in India is highly promising, with significant growth expected across various payment methods. UPI, Pay Later services, contactless payments, digital wallets, and regulatory developments will shape the landscape and provide new opportunities for businesses and consumers. By staying informed about these trends and aligning their strategies accordingly, businesses can position themselves at the forefront of India’s digital payments revolution.