India’s digital payments are poised for explosive growth, projected to reach a staggering $7 trillion by 2030, according to a joint study by Kearney and Amazon Pay, titled ‘How Urban India Pays.’ This represents a doubling of current levels, indicating a transformative shift in the country’s financial landscape.
The study attributes this growth to the phenomenal success of the Unified Payment Interface (UPI), a digital payment system developed by the National Payments Corporation of India (NPCI). UPI transactions have witnessed a remarkable 138% increase from financial year 2018 to 2024, highlighting its widespread adoption across the nation.
The digital payment revolution in India is evident in the rapid growth of retail transactions. In the financial year 2023-24, India’s digital payments for retail transactions reached $3.6 trillion, a significant leap from just $300 billion in the financial year 2017-18. This highlights the rapid shift from traditional payment methods to digital alternatives.
The study also reveals that India’s e-commerce market, valued at $75 billion to $80 billion in 2022, is projected to grow by 21% annually, reaching substantial proportions by 2030. This expansion is driven by the increasing preference for online shopping, further solidifying the role of digital payments in the country’s economic fabric.
While UPI dominates the landscape, card and digital wallet transactions contribute a notable 10% to the total digital transaction value. Furthermore, India’s digital transactions accounted for a staggering 46% of global digital payment volumes in 2022, cementing its position as a global leader in this space.
The study delves into the consumer behavior surrounding digital payments, revealing compelling insights. An online survey of over 6,000 respondents across 120 Indian cities revealed a strong preference for digital payments over traditional methods when purchasing goods or services online. Wealthier buyers, in particular, rely heavily on digital payments, utilizing them for over 80% of their transactions.
The adoption of digital payments is not limited to consumers; businesses are also embracing this transformation. Over 1,000 merchants surveyed reported using digital payments for 69% of their transactions. This trend is evident across various business sectors, from street vendors like paan shops and fruit sellers to food stalls and kirana stores, reflecting the widespread penetration of digital payments.
The report acknowledges the challenges associated with this transition, including cybersecurity threats, financial crimes, limited coverage, and building mutual trust. Despite these hurdles, the study highlights the key role of millennials and Gen X in driving digital payment adoption, with these demographics accounting for 72% of their transactions through digital means.
Looking ahead, the future of India’s digital payments journey is focused on reaching lower-income consumer groups and expanding coverage to smaller towns. While major cities have embraced digital payments, with 75% of respondents using digital methods, smaller towns lag behind, with only 65% adoption rates. Tier 2 cities, including Lucknow, Patna, Bhopal, Jaipur, Bhubaneshwar, Indore, Ahmedabad, and Pune, are closing the gap with their respective metro cities in digital payment adoption, despite their lower retail market potential compared to the top six metros (Delhi, Mumbai, Kolkata, Chennai, Bengaluru, and Hyderabad).
As India continues its journey toward a cashless society, the report emphasizes the need to address the challenges and capitalize on the opportunities presented by the digital payment ecosystem, ensuring its inclusive and sustainable growth.
