Report Overview

The government’s increasing number of supportive initiatives, high adoption of smartphone and internet, and booming e-commerce sector are expected to drive the India Digital Payment Market during the forecast period between 2024 and 2030.

India Digital Payment Market – Industry Trends & Forecast Report, 2030

The India Digital Payment Market size was estimated at USD 116.6 billion in 2023. During the forecast period between 2024 and 2030, the India Digital Payment Market size is projected to grow at a CAGR of 10.09% reaching a value of USD 123.23 billion by 2030. Prominent drivers of the market include increasing government initiatives, growing technological advancements, further deepening penetration of internet and smartphones, and the burgeoning e-commerce sector. Government policies, such as the demonetization policy of 2016 and initiatives like Digital India, Make in India, and Startup India, have significantly accelerated the adoption of digital payments. The introduction of the Unified Payments Interface (UPI) and the Bharat Interface for Money (BHIM) app has further revolutionized the digital payments landscape, enabling seamless real-time transactions. The rise in internet users along with the widespread adoption of smartphones, has also fueled the growth of mobile wallets and other digital payment methods. The expanding e-commerce market has increased the demand for digital payments, while private sector contributions, including various digital payment solutions like mobile wallets and QR code-based systems, complement government efforts. Furthermore, targeted initiatives in rural areas have expanded financial inclusion, supporting the overall growth of the digital payment ecosystem in India. This dynamic environment underscores a promising future for digital payments, as the market continues to evolve and expand.

Digital Payment – Overview

Digital payment refers to the transfer of money or value from one party to another using electronic methods instead of traditional cash transactions. It encompasses various forms of electronic payment methods, such as mobile wallets, credit and debit card payments, online banking, UPI (Unified Payments Interface), and QR code-based transactions. Digital payments are characterized by their speed, convenience, and security, allowing individuals and businesses to conduct transactions electronically via computers, smartphones, or other digital devices. These payments can be made for a variety of purposes, including purchasing goods and services, transferring money between individuals, and paying bills.

India Digital Payment Market

Growth Drivers

Government’s Supportive Initiatives

The Indian government has played a crucial role in promoting digital payments through initiatives like Digital India, Make in India, and Startup India. These programs aim to digitize various sectors and encourage a cashless economy. The demonetization policy further accelerated this shift, significantly increasing digital transactions and financial inclusion. Government efforts have also focused on improving digital payment infrastructure, providing incentives for merchants, and promoting the use of digital payment methods in rural areas. These initiatives have collectively contributed to the rapid growth of the digital payments ecosystem in India, setting a strong foundation for a cashless economy.

Increasingly High Adoption of Smartphones

The rapid adoption of smartphones across India has significantly boosted the use of digital payments. Deepening smartphone penetration has facilitated the growth of mobile payment platforms, such as UPI, which have seen substantial growth in transaction volumes and values. The convenience, accessibility, and security provided by mobile payment apps have increased user confidence and preference for digital transactions. This trend is particularly evident in the rise of person-to-merchant (P2M) transactions, demonstrating how smartphones are transforming the payments landscape and driving the broader adoption of digital payment methods.

Booming E-commerce Sector

The expansion of e-commerce in India has been a key driver for the adoption of digital payments. As online shopping becomes more prevalent, the demand for seamless and secure digital payment methods has surged. Digital wallets, UPI, and other payment apps have become integral to the e-commerce ecosystem, facilitating easy and quick transactions. The growth of e-commerce, projected to reach substantial levels in the coming years, underscores the importance of robust digital payment infrastructure. This synergy between e-commerce and digital payments is vital for the continued expansion and success of the digital economy in India.

Challenges

Limited Digital Literacy

Limited digital literacy could significantly hamper the growth of India Digital Payment Market. With only 38% of households being digitally literate, many individuals, especially in rural areas, struggle to adopt digital payment methods like UPI and Aadhaar-enabled services. Despite initiatives like the Digital India Program and the Akshaya project, a substantial gap remains. Enhancing digital skills is critical for integrating more users into the digital economy and fostering market growth.

Impact of Escalating Geopolitical Tensions on India Digital Payment Market

Geopolitical tensions can have a multifaceted impact on the India Digital Payment Market by affecting investor confidence, hindering cross-border transactions, and increasing regulatory scrutiny. Heightened instability may deter foreign direct investments, stalling innovations and infrastructure development in the digital payment sector. Moreover, trade restrictions and sanctions imposed by other countries could limit India's access to critical technologies and payment networks, constraining market expansion. Additionally, increased security concerns may prompt tighter regulations and compliance measures, adding complexity and costs to digital payment operations. Overall, geopolitical tensions pose significant challenges to India Digital Payment Market, necessitating careful navigation and risk management strategies.

India Digital Payment Market

Segmental Coverage

India Digital Payment Market – By Mode of Payment

By mode of payment, the India Digital Payment Market is divided into Digital Wallets, Net Banking, Cards, UPI, and Point of Sale (POS) segments. The UPI segment holds the highest share in the India Digital Payment Market by mode of payment. The UPI (Unified Payment Interface) segment has emerged as the favored payment mode since its inception in 2016. According to the RBI, UPI accounts for 75% of total digital payments, facilitating both P2P and P2M transactions. Transaction volume has surged from 0.45 crore in January 2017 to 804 crore in January 2023, with transaction value rising from INR 17 billion to INR 12.98 trillion. Initiatives, like the Digital Payments Awareness Week, aim to deepen digital payment adoption nationwide. Additionally, systems, like BBPS, NETC, and NACH, further propel the migration to digital payments, ensuring efficiency and reliability. International collaborations, such as UPI-PayNow, enhance cross-border payment systems, showcasing India's commitment to digital innovations. Meanwhile, the mobile wallet segment holds the second highest share in the India Digital Payment Market. With the proliferation of smartphones and improved internet accessibility, digital wallets have become increasingly convenient for users. They offer a seamless payment experience, allowing individuals to add, store, and transact money digitally. During the period of demonetization in India (2016), digital payments saw a surge, further establishing digital wallets as a preferred payment option. Moreover, digital wallets provide robust security measures to safeguard sensitive information and transaction details, enhancing their appeal among users and businesses alike. Overall, the convenience, security, and widespread acceptance of digital wallets contribute to their significant presence in the Indian digital payment landscape.

India Digital Payment Market – By End user Industry

On the basis of end user industry, the India Digital Payment Market is divided into BFSI, Retail & E-commerce, Healthcare, Hospitality & Travel, and Logistics & Transportation segments. The BFSI segment holds the highest share in the India Digital Payment Market by end user industry. Banking, financial services, and insurance (BFSI) companies spearhead the adoption of digital payment technologies, enhancing customer experiences and streamlining financial transactions. With a wide array of services, such as mobile banking, internet banking, and digital wallets, banks play a pivotal role in driving the high adoption of digital payments among their customers. Initiatives like UPI (unified payments interface) and mobile banking apps have catalyzed digital transactions within the BFSI sector. Overall, the BFSI segment's robust infrastructure and innovative digital solutions solidify its position as the primary driver of digital payments in India.

India Digital Payment Market – By Region

Geographically, the India Digital Payment Market is segmented into North India, South India, East India, and West India regions. The South India region holds the highest share in the India Digital Payment Market and is expected to maintain its dominance during the forecast period. Major southern Indian cities like Chennai, Bengaluru, and Hyderabad, have surged to the forefront, registering significant volumes and values in digital transactions. The southern region's dominance can be attributed to its robust digital infrastructure, widespread adoption of digital payment solutions, and proactive measures by both public and private stakeholders to promote cashless transactions. Additionally, the thriving tech ecosystem in cities like Bengaluru contributes to the region's leadership in digital payments. As the landscape evolves, South India's continued focus on innovations and collaborations ensures it remains at the forefront of India Digital Payment Market.

Competitive Landscape

Major players operating in India Digital Payment Market include Alipay, Paytm, PhonePe, Cred, Razorpay, CCAvenue, Instamojo, Zeta, BharatPe, BillDesk, PayPal, Venmo, Cash App, and Rupay. To further enhance their market share, these companies employ various strategies, including mergers and acquisitions, partnerships, joint ventures, license agreements, and new product launches.

Recent Developments

• In May 2024 - The Adani Group, a major business conglomerate in India, diversified into India's digital payment and e-commerce sectors through its consumer app, Adani One. Adani’s plans include applying for licenses to operate on India's public digital payments network and co-branding credit cards with banks. Additionally, the group aims to join the Unified Payments Interface (UPI) and explore online shopping via the Open Network for Digital Commerce (ONDC).

• In March 2024 - The Reserve Bank of India announced its plans to introduce interoperability for internet banking, allowing seamless transactions across various digital payment systems. The central bank of India stated that this initiative aims to expedite fund settlements for merchants. The RBI had approved NPCI Bharat BillPay Ltd (NBBL) to implement this interoperable system. Currently, internet banking transactions lack interoperability, requiring separate integration with each Payment Aggregator (PA) for different merchants.

Scope of the Report

By Mode of Payment

• Digital Wallets

• Net Banking

• Cards

• UPI

• Point of Sale (POS)

By End User Industry

• Retail & E-commerce

• Healthcare

• Hospitality & Travel

• Logistics & Transportation

By Region

• North India

• South India

• East India

• West India