A global advisory KPMG recently released a report on “Fintech in India powering mobile payments” which said Digital payments are seeing a thriving growth and gaining traction with a Compounded Annual Growth Rate (CAGR) of 12.7 per cent in the number of non-cash transactions.
With nearly 1.5 million digital payment acceptances in 2016-2017, the number of merchants accepting digital payments modes has increased to over 10 million, in a short span of two to three years. The mobile payment revolution with its evolving form factors has led to a boom in the number of merchants adopting digital payments, said the report.
With increasing numbers of mobile users in India, people have started adopting cashless methods to do the payments. According to the report, over the past two decades in India, technology developments and the evolution of device form factors have led to a gradual transformation of digital payments. While feature phones were limited to USSD (Unstructured Supplementary Service Data), the advent of smart-phones and the internet has opened up a host of form factors and access to payment technologies. Digital payments have come a long way with peer-to-peer transfers to camera-enabled QR code scanning and voice banking. Small and big merchants have started adopting QR-code based wallets due to its ease of payments and low setup costs.
The report considers wallet players as one of the key factors that played a transformational role and democratized mobile payments in India. The ease of payments, ubiquity and convenience were the factors that led to extensive adoption of wallets. Another factor that has led to the next wave in mobile payments is UPI based real-time payments. The volume of UPI transactions has increased at a CAGR of 246 percent during the period January 2017 to June 2019. Some of the factors such as interoperability and possibility of origination across different platforms such as mobile wallets is further fuelling the growth of UPI transactions.
India is rapidly growing from a cash-based economy to a cashless economy. India is forecasted to see the fastest growth in digital payments transaction value between 2019 and 2023, with a CAGR of 20.2 percent, ahead of China and the United States, said the report. Furthermore, it said that the progressive thought process of Reserve Bank of India (RBI), central and state governments, industry associations and payment corporations has brought the evolution of digital payments in India. RBI has forecasted an outcome of a 50 percent increase in mobile-based payment transactions as per the ‘2021 vision document’19. This shift can be attributed to the driving factors such as robust payment infrastructure, the evolution of form factors, availability of structured data, a shift in consumer behavior and government’s vision to transform India into a cashless economy. It aims at empowering every Indian with access to a bouquet of e-payment options that is safe, secure, convenient, quick and affordable in its Payment Systems Vision 2021 document.