Here’s Why Global Players Are Vying India’s Digital Payments Market
India’s digital payments market is witnessing immense growth and development in the past couple of years. Since the demonetization drive, several digital initiatives by the government have opened up an array of new payment possibilities. Due to these initiatives, India’s digital payment marketplace has become extremely competitive and is expected to be worth an astounding 500 billion by 2020! WhatsApp, with over 200 million active users in India, is making great strides with its digital payments feature – WhatsApp Pay. By enabling friends and family to make payments within the app without switching screens, it is poised to transform the market. With WhatsApp causing such uproar in the market, Truecaller acquired the multi-bank payments app Chillr to enter the Indian digital payments market and Google Tez is offering scratch cards with reward upto Rs 1 Lakh for users who make reasonably large transactions. No wonder several global players are vying for India’s digital payments market – to offer cutting-edge solutions that meet the demands of the industry as well as to achieve profits like never before.
What Makes India an Interesting Market
In a bid to make India a cashless economy, the digital payments industry is witnessing a massive surge, which is why a growing number of foreign players are looking to foray into India and cash-in on the growing opportunity.
Here are 5 reasons that make India’s digital payments market so interesting:
- The multitude of government reforms: The path to digital India has been made easy with the multitude of government reforms:
- The demonetization drive was a significant step towards making India a digital economy. Immediately after the drive, the steep rise in the use of credit and debit cards and e-wallets and the demand for POS systems and card swipe machines have resulted in massive growth of digital payments.
- The JAM trinity (an initiative to link Jan Dhan accounts, Aadhaar cards and mobile numbers) enables easy and affordable access to banking, remittance, credit, insurance and pension services to the poor. Under the anti-poverty and support schemes, the government, as of July 2018, has delivered direct benefits to the poor and has made a cumulative transfer of Rs 140,909 crore.
- United Payment Interface or UPI withdraws and deposits amounts directly from users’ bank account, allowing them to make instant, real-time inter-bank transactions. Since users no longer have to worry about payment intermediaries, service charges or loading a mobile wallet with money for transfer, the growth of UPI has been impressive. In June 2018 alone, 37 million transactions worth 40,834 crores were made using UPI.
- The BharatQR integrated payment system – interoperable with all banks – facilitates users to transfer money from one source to another by scanning QR codes. By providing a common interface, BharatQR minimizes the need to make payments using credit and debit cards and improves the safety and security of transactions.
- Aadhaar Pay – a biometric-based payment system – allows merchants to directly collect payments from customers using their Aadhaar number and biometric identification. Merchants can enjoy seamless fund collection, low transaction charges, instant account to account fund transfer, and reduced cash handling cost and risk whereas customers can make easy, cashless payments without the need to remember PINs and passwords or use a smartphone to make payments.
- Majority of population is mobile first: India has a major role to play in the global mobile revolution. Today, there are over 5 million mobile phone users in the country, a number that is expected to grow to 813.2 billion in just one year. With a majority of the Indian population using a mobile phone – 30 million smartphones were sold in the country in the first quarter of 2018 itself – to communicate, play games, book hotels and flights, order food and shop for goods, India is fast becoming a mobile-first economy and a great market for the digital payments industry.
- Role of telecom providers: The surge in mobile usage is being driven by telecom operators such as Reliance, Vodafone and Airtel that are offering advanced 4G networks across the country with improved network coverage and mobile broadband capabilities. The launch of Reliance Jio ignited a massive price war in the country that drove down data prices by nearly 20%. As Jio lured over 100 million customers by offering data at dirt cheap rates – and others followed suit – there has been a steep rise in usage of mobile data, that make digital payments a viable market in India. Among the G20 nations, today India leads mobile internet usage with approximately 478 million Indians accessing the Internet using their phones. In fact, the Ministry of Telecommunications is currently in the process of creating a roadmap to roll out 5G in India by 2020.
- Burgeoning e-commerce market: With rise in disposable income, access to mobile Internet, a large product range, convenience of shopping and easy payment options, the Indian e-commerce growth story has been impressive. Today, India is one the fastest-growing e-commerce markets in the world. According to a report by NASSCOM, by 2020, the Indian e-commerce industry is expected to reach $34 billion; 70% of all e-commerce transactions will be done via mobile phones. Much of the growth of the industry has been due to the ongoing digital transformation in the country. According to IBEF, India’s total internet user base to is expected to reach 829 million by 2021, at an annual rate of 51% – the highest in the world.
- Huge millennial population: With the tech-savvy, always-online, digital millennial generation using 3 devices each day and spending about 25 hours per week online, it’s hard to imagine a time when the world had no Internet. Internet-centric millennials have no time or patience for slow Internet connections, cumbersome shopping sites or complex payment modes and want to be able to shop, make purchases and meet their needs in the easiest and quickest manner possible. This opens up myriad possibilities for players in the digital payments market, who can build and offer seamless and modern payment options to meet the distinct technology needs of the growing generation.
India as a Lucrative Market
The Indian digital payments industry is undergoing a massive transformation; according to reports, digital payments in India is expected to reach $1 trillion by 2023. Several government reforms and initiatives are largely responsible for this and are causing the industry to surge like never before. Along with the myriad government-driven payment options, the industry is also witnessing several national players upping their game in the market with advanced and secure digital payment options. It is estimated that by the year 2020, cashless transactions will constitute 55% of all online sales. With an upward growth trajectory, and the success of digital payments in India, the technology-enabled digital payments industry has become a lucrative market for global players to deepen their financial reach and standing in a dynamic and growing economy.