India’s digital payments industry will grow to $500 billion by 2020, and will account for 15 per cent of the country’s GDP, according to a study put together by Google and Boston Consulting Group (BCG). The study says more than 50 per cent of India’s internet users will use digital payments by the year 2020, and the top 100 million users will drive 70 per cent of the gross merchandise value (GMV) for these payments.
The study is based on Nielsen’s qualitative and quantitative research with over 3,500 respondents, combined with BCG and Google.
According to the report, India’s non-cash contribution in the consumer payments segment will double to 40 per cent by the year 2020. For the purpose the study, non-cash includes cheques, demand drafts, net-banking, credit/debit cards, mobile wallets and UPI.
However, the study shows that customers who have moved to digital payments are overwhelmingly in favour (81 per cent) of sticking with existing digital payments, rather than use other non-cash payment methods which would include cheques, demand drafts, etc. Online shopping, payment of utility bills and buying movie tickets are the top three use cases for customers in India.
The report also highlights Indian consumers have a high chance (over 90 per cent) of using digital payments for both online as well as offline transactions. The report says by 2020 over 60 per cent of digital payments value will be contributed by offline points of sale such as unorganised retail, eateries, transport, etc.
The study says convenience, followed by availability of offers is what is driving digital payments in India. However the size of transactions in digital payments will still be small with 50 per cent of person-to-merchant transactions expected to be under Rs 100.
“It is telling that half of India’s internet users will use digital payments and that the top 100 million users will drive 70% of the GMV – a clear indicator of the growing importance of the digital consumer,” said Rajan Anandan, VP, South-East Asia & India for Google in a press statement.
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“Global digital payments is undergoing rapid transformation and is set to grow four times in value by 2020. India is on an even more exponential growth trajectory. The smartphone explosion will usher in a new era in digital payments in India over the next few years that will see digital payments exceed $500Bn by 2020 and non-cash transactions exceed cash transactions by 2023,” said Alpesh Shah, Senior Partner & Managing Director, The Boston Consulting Group, India.
The report also highlights the challenges for the industry. It points out that the one out of two non-users gave up on digital payments because it was too complex when it came to usage and understanding. Also 61 per cent of non-user merchants said digital payments were complex to use. Plus factors like speed of transactions during peak hours, etc are other inhibitors to growth.