Digital payments to more than double to $235.2 billion by 2023: Assocham-PwC study

"The total volume of retail electronic payments witnessed about nine-fold increase over the last five years," RBI Governor Shaktikanta Das had said in his keynote address at NITI Aayog's FinTech Conclave in March. The future of the sector is likely to be far rosier. According to a new ASSOCHAM-PwC India study, India's digital payments transaction value is projected to more than double to $135.2 billion (Rs 9.44 lakh crore) in 2023 from $64.8 billion this year.

"India is expected to clock the fastest growth in digital payments transaction value between 2019 and 2023 with a compounded annual growth of 20.2 per cent," said the study. This, in fact, is ahead of China's growth rate of 18.5 per cent and 8.6 per cent for the US, albeit on a smaller base. Moreover, in the next four years, India's share of worldwide transaction value of digital payments is set to increase from 1.56 per cent to 2.02 per cent.

This is courtesy factors such as the rise of digital commerce, innovations in payments technology using Artificial Intelligence, the Internet of Things (IoT), real-time payments and the introduction of mobile point of sale (POS) devices, all of which are pushing down the cost of acceptance infrastructure. The early successes of wallets of non-banking players -Paytm, for one - as well as regulatory efforts also catalysed the digital landscape in the country over the last three years, especially in the past one year, the study added.

"This has helped transform the competitive digital payments landscape in India to include telecom players, banks, wallet companies and [etailers]," ASSOCHAM said in a statement.

According to the study, going forward, the key growth driver for digital payments would be inter-operability between the Pre-Paid Instrument (PPI) players - already numbering close to 50 in the country. At present, a customer as well as a merchant needs to have a common PPI operator to process e-payments. However, once e-wallets of private firms are allowed to interoperate, users of one wallet app will be able to transact with users of a different wallet app. Furthermore, customers will be able to make payments at any and all digitally-enabled merchant outlets without any platform restrictions.

''What makes interoperability possible is the UPI [Unified Payment Interface], which allows users possessing accounts in different banks to transact with each other in real time," said the study. "With wallet interoperability, this platform can be leveraged to facilitate easier mobile wallet transactions, thus paving the way for a more connected peer-to-peer merchant network."

Though India is growing at the fastest pace, it still has a long way to go to catch up with the global market leader, China. The overall value of transactions at the neighbouring country is pegged at a whopping $1.56 trillion. The study also revealed that the digital payments industry would need to address challenges such as low margins primarily due to a cashback-driven culture, process inefficiencies like Know Your Customer bottlenecks and cyber security threats, Mint reported.    

In order to encourage digital payments, the Nandan Nilekani led committee set up by the RBI has suggested a host of measures, including elimination of charges, round the clock RTGS and NEFT facility and duty-free import of point-of-sales machines. The committee submitted its suggestions on promoting digital payments to Governor Shaktikanta Das last month.

Taking cues from the submitted report, the banking regulator last week waived-off all charges on fund transfer through the RTGS and NEFT systems, with effect from July 1. The country's largest bank, State Bank of India (SBI), charges between Rs 1 and Rs 5 for transactions through NEFT - for fund transfers of up to Rs 2 lakh - and between Rs 5 and Rs 50 for the high-value RTGS transactions. The RBI has also asked banks to pass on the benefits to customers from the same day.

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