Ever since 2014, India has gained significant traction in digital payments. In 2020, at 25.5 bn transactions, India has retained top spot in the world in real-time payment transactions ahead of countries like China, South Korea, Thailand and the UK.
As per New ACI Worldwide Research report, India stood at 15.6 per cent and 22.9 per cent for instant payments and other electronic payments respectively, while paper-based payments had a considerable share of 61.4 percent.
By 2025, Digital payments in India would collectively account for 71.7 percent of overall payments volume, leaving cash and cheques at just 28.3 percent.
The ACI Worldwide report observes that over the last four years in India, UPI achieved phenomenal success by creating a rail that supports pull as well as push, and exchange of data beyond just payments.
The UPI payment processing platform, is expected to increase sevenfold by 2025. Fintechs are beginning to use consumer behavior history beyond transactions to make credit decisions. Delivering on these capabilities requires a fully modernized payments platform. Government of India is promoting such modernization, with plans to drive toward 1 billion transactions per day.
Mobile wallet usage has also grown significantly, with adoption among adults up nearly threefold in the past five years. Mobile wallets now play an important part in the payments ecosystem, and with UPI integration in some of the most popular wallets, they are another factor fueling real-time payments growth in India.
Lesson for other markets
Finally, India provides a lesson for other markets on how a vibrant and open ecosystem can set the stage for the private sector to drive innovation—lowering risks and costs for central infrastructure owners.
Fintechs have stepped up to drive the adoption of digital payment methods across customer and merchant touchpoints using Open APIs that enable customized financial services on various digital platforms.
From basic banking services, such as account creation and fund transfers, to digital lending and alternative credit, banks and fintechs have created a collaborative ecosystem for providing differentiated offerings to end consumers and merchants.
In response, all major banks have launched open banking platforms and have granted sandbox access to various fintechs so they can register, access the APIs and innovate for the consumers and merchants who are now increasingly choosing to use fintech platforms over banks’ inhouse channels.