India, it must be said, is truly going digital. From ordering food to ordering a cab to ordering food with a cab, the Indian market just keeps incorporating more and more technology into its everyday functioning with every passing day. Given such a massive change in the overall market dynamics, the payments industry – considered to be the very foundation of the economy – has not been left untouched, witnessing a rapid growth in its digital payments segment.
The volume of card-based transactions has gone up considerably for both debit and credit cards, while several digital payments facilitators have also launched their service to impressive consumer response within the country. The Government of India has already announced its ambitious project that will bring digital payments on par with offline transactions, and has issued payments banks licenses to 11 companies in order to enable low value, high volume transactions and extend the benefits of digital payments to the as-of-yet untapped population.
Debit and credit cards are expected to grow at a CAGR of 25-30 percent and are pegged to see a marked increase in the number of transactions as well as the average ticket value, while the mobile wallets segment, which is one of the fastest growing verticals in the digital payments industry, is widely expected to demonstrate an astounding 127.5% year on year growth rate till 2020 to touch a net worth of $6.6 billion in India. This favourable confluence of positive consumer reception, growing demand for services, support from the government and huge business opportunity is what is attracting the international digital payments players to the Indian market, who are extremely excited at the prospect of entering the country’s booming digital payments industry.
However, there are other factors that tend to take some of the gloss off this rosy picture. Despite the rapid adoption of digital technology, smartphones and the internet, a large part of the Indian population has still not adopted digital payments into their everyday transactional behaviour. Cash is largely the major mode of transactions, even amongst the mobile-first urban consumer base.
Moreover, despite being home to the third largest internet user base in the world, the overall penetration in India is still very low as compared to some of the more developed economies, such as the US, lagging by a margin of 20 percent. These are some of the hurdles that the international entrants must keep in mind before taking the plunge into the Indian digital payments ecosystem.
But in every adversity, there is an opportunity, especially in a rapidly growing, digital-first economy such as India. The government has rolled out several initiatives such as the ‘Digital India’ campaign in order to improve the internet connectivity, while steps are being taken to incentivise the country’s largely unbanked population into using digital payments as their prime mode of transaction; this will decrease the dependence on hard currency and ease the financial burden of managing cash on the economy, which is currently estimated to be in excess of INR 20000 crore. Additionally, with smartphones now being made available for entry level users at highly cost-effective prices, the digital payments industry is set for another phase of rapid boom.
Given such favourable conditions and high opportunity-to-risk ratio, any international player worth its salt in the global digital payments sector will not want to miss out on the unique, exciting proposition that the Indian market presents.
I, for one, am very excited about entering the Indian digital payments industry, particularly when considering how open the country’s small and medium businesses have become to the idea of augmenting their current offerings and outreach extensively by incorporating an online aspect. I am expecting regulatory bodies to partner with banks and payments players to cut down the costs involved in bringing the SMBs online and to make the entire process hassle-free and efficient.
Moreover, in keeping with our learnings from the global market, I also foresee players like banks, logistics services and e-payment solution providers partnering with one another to create a holistic ecosystem that addresses each and every business requirement for both big and small ventures.