India is set for a digital payments revolution, with the value of transactions set to hit US$500 billion by 2020, ten times its current level, according to research from Google and the Boston Consulting Group (BCG).
The Indian government has made the migration from cash to electronic payments a key plank of its strategy to boost financial inclusion, joining the UN-based Better than Cash Alliance, launching a Unified Payments Interface, and relaxing the regulatory environment for new mobile-based financial services providers.
These factors, along with the expected rise in the number of smartphone users to 520 million by 2020, will contribute to a massive increase in digital payments, says the research, which is based partly on data from Nielson.
By 2020, more than half of India's internet users will make digital payment, which will account for 15% of the country's GDP. There will be more than 10 million merchant sites that will accept digital payments, driving growth in person-to-merchant transactions, while B2B and P2P payments will also see huge growth.
Rajan Anandan, MD, Google, Southeast Asia and India, says: "Spurred by smartphone penetration, and supported by progressive regulatory policy, the digital payments industry is at an inflection point. It is telling that half of India’s internet users will use digital payments."
Nearly two thirds of Indians that are aware of digital payments instruments move to the trial stage and 81% of those that use them prefer the methods to other non-cash options such as cards, with convenience the main factor driving digital uptake.
Alpesh Shah, senior partner & managing director, BCG, India, says: "The smartphone explosion will usher in a new era in digital payments in India over the next few years that will see non-cash transactions exceed cash ones by 2023."
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