The phenomenal rise in smart phone usage coupled with internet penetration, availability of several easy payment options among banking and non-banking institutions through POS and positive changes in regulatory norms are increasingly driving Indians to adopt digital payment option, which is likely to worth a whopping $500 billion by 2020, according to a report.
A new study by internet giant Google and Boston Consultancy Group (BCG) pointed out that Asia’s third largest economy will witness its overall spend through digital means reaching a ten-fold rise to reach $500 billion in four years from now, which is country’s 15% of current GDP.
“Aided by smart phone penetration and progressive regulatory policies, India’s digital payment industry is all set to witness a ten-fold increase by 2020. Top 100 million internet users having smart phones or otherwise, are likely to contribute 70 % of Gross Merchandise Value (GMV), which indicates the increasing trend of people preferring digital payment option,” says Rajan Anandan, Google’s vice-president for India and South-East Asia.
Experts believe that the trend will drive more POS machines like POS Printers, Barcode Scanners, Barcode Printers, MSRs, Touch POS, Tablet POS or Mobile Payment Solutions such as Mobile POS, etc., into Retail Sector, where more number of transactions happens through non-cash modes such as credit/debit cards, Unified Payment Interface (UPI), mobile wallets, net-banking, cheques or demand drafts.
The report also forecast that the number of cashless transactions, which today stands at 22% of all transactions, will supersede cash transactions by 2023 and the trend will benefit more start-ups in digital payment platform and e-commerce companies, and enhance financial inclusion in India.
Among the digital payments, utility bills, online shopping and movie tickets occupy the top three slots while payments through digital wallets or credit/debit cards have emerged as top payment modes over the past few years, the study noted. The digital mode of transactions have won the shoppers’ confidence due to easy transaction, facility to use smart phone as touch point for payment across several outlets, affordable Internet, and improved encryption and data security.
According to a Reserve Bank of India (RBI)’s recent report, mobile wallets have already overtaken mobile banking in terms of volume. The apex bank said that the mobile wallet transactions have doubled during April 2015-February 2016 to cross Rs 55 crore.
Among the leading firms which encourage customers to transact payments digitally are online ticketing firms Indian Railways, Cleartrip (airlines), Makemytrip, Abhibus, redBus, Yatra and Bookmyshow (event and movie ticketing), the report said.
Convenience has become the most important factor to drive the growth of digital payment industry followed by offers, the report said, adding, consumers are 90 per cent more likely to use digital payment methods for both offline and online transactions in the forecast period.
However, experts believe that lot has to be done to digitalize India as still more than 12 million retailers are following traditional means to do business, notwithstanding the advancement in technology which took several of their counterparts to great heights. India has only 1.2 million POS terminals in India compared to 13 million in the US.
Pointing out that mobile will be the single biggest driver in the coming years in India, Bhaskar Venkatraman, Founder and Director of JusTransact.com, a leading e-commerce company deals with Point of Sale technology products for retail and non-retail applications, said, “Mobile has become ubiquitous in India, and most of the transactions in future will happen via mobile-to-mobile. So, even for small payments traders would prefer cashless transactions because of convenience and change problem.”