Year Ender 2021: Digital payments ruled in 2021, digital lending to watch out for in 2022

Financial technology companies (or Fintech) and new age non-banking finance companies (NBFCs) are expected to corner a 17 per cent market share in public valuations with private banks also increasing their share to a comfortable 50 per cent by 2026. 

The market cap gains of these two players will be at the cost of public sector banks (PSBs) and traditional NBFCs.

These are the findings of a consultancy firm BCG issued last week.

The market cap trends already show up in the Paytm listing, a giant in digital payments in the country. This major player in the wallet and merchant payments segment has got a market capitalisation of Rs 86,000 crore. 

This is more than double of PSBs like Bank of Baroda (Rs 41,000 crore ), Punjab National Bank (Rs 40,000 crore) and Union Bank of India (Rs 29,000 crore).

The tech-savvy private banks like HDFC, ICICI, Axis and Kotak Bank are driving the digital payments in the market. 

The share of retail digital payments is currently 24 per cent of the total payments going through the digital modes like UPI, NEFT, IMPS, prepaid instruments, credit and debit cards. Three years ago, this share stood at 16 per cent.

The retail digital payments were at Rs 358.59 lakh crore in 2020-21 out of the Rs 1470.86 lakh crore total payments in the country. 

The last two pandemic years have really accelerated the digitisation drive with more and more people using the online fund transfer payment facilities.

Experts suggest that the next phase of exponential growth is expected in digital lending. The new-age fintechs and NBFCs have been taking a lead in terms of innovation and risk. 

Take, for instance, the buy now, pay later (BNPL) has emerged as the newest loan product, which is witnessing strong growth. These new digital lenders are either lending directly or tying up with banks under a platform lending model.

Lalit Mehta, co-founder and CEO at Decimal Technologies says that many customers have realised the inefficiencies that plague traditional lending such as the need to complete physical paperwork, undergo cumbersome KYC, and deal with in-person interactions. 

In fact, many banks like HDFC Bank, ICICI Bank, and SBI are witnessing growing volumes in the digital lending space.

Take, for instance, the SBI's super app Yono has disbursed Rs 7,875 crore personal loans in the first two quarters of 2021-22.

The year 2022 will also see the new regulatory framework for digital lenders. The RBI is also closely monitoring the lending activities of non-bank players (platform-based lenders) for any unhealthy practices and non-transparency in disclosures of interest rate terms and inadequate customer grievance framework.

In the payments space, the retail payments infrastructure created by the National Payment Corporation of India (NPCI) has been playing a key role. 

Initiatives like RuPay card, Immediate Payment Service (IMPS), UPI, BHIM, BHIM Aadhaar, Fastag etc. are contributing to digital payments volumes.

According to payment statistics, the UPI is emerging as the fastest-growing digital payment tool with payments via UPI doubling from Rs 21.31 lakh crore in 2019-20 to Rs 41.03 lakh crore in 2020-21. 

While the credit and debit card payments declined marginally, the NEFT, IMPS and other digital payments modes have grown robustly. 

The RBI has also taken big initiatives like card tokenisation (using codes instead of actual card details for safety), 24X7 NEFT and RTGS, Regulatory Sandbox for innovations by banks and fintechs etc.

There are also new business models like small finance banks (SFBs) and Payments Banks which are working towards the digitisation of micro-loans. 

Bhavin Patel, Founder & CEO of, LenDenClub says that the first two waves of COVID-19 have profoundly revolutionised the way individuals invest, especially the millennials. 

"The post-Covid age is poised to witness a radical 180-degree turn in digital lending. P2P lending will be seen as a leading alternative investment class in less than no time," says Patel.

In fact, the biggest impact of these digital initiatives would be on financial inclusion.

Also Read: Apple might replace the digital crown on the Apple Watch with optical sensors

Also Read: SBI Card partners with Paytm for tokenising cards