Spurred by a smart phone revolution, India is at the inflection point where online payments through digital wallets are emerging as the preferred transaction mode. With the Internet becoming more affordable along with the ease of transaction and better security with encryption methods, customers are going “cashless” in droves!
According a new study by Google and the Boston Consulting Group in September 2016, there will be an exponential rise in digital payments in India in the next four years. It is expected that the digital payments industry will grow 10 times to $500 billion by the year 2020 and will contribute about 15 per cent of the gross domestic product (GDP). The entry of the non-banking institutions that offer digital payments is also going up considerably.
By 2018 it is expected that half of all Internet users in India will use digital payments and wallets for their daily needs. It is also predicted that non-cash transactions will exceed cash transactions in the economy by 2023. Non-cash modes of payment such as cheques and demand drafts, credit and debit cards along with mobile wallets will be 40 per cent of consumer payment segment by 2020. In the past 5 years, there has been spurt in the growth of start ups that promote digitisation of transactions in the economy. Mobile wallets help boost financial inclusion in all forms across sectors in the country. Online ecommerce also helps drastically speed up the way business is conducted in daily life.
Convenience is the reason that has been driving this growth. Also, the availability of offers helps consumers opt for the card or the mobile wallet. Many digital wallet firms encourage their consumers to transact business online and have tied with grocery stores, apparel shops and fuel stations. These offline points of sale have nearly contributed to 60 per cent of all digital payments in 2016.
What is crucial now; say economists is the universal acceptance of digital payment methods and the speed of transactions in peak hours. Merchants believe that it is the digitisation of micro level transactions that will truly be the test of such measures in an evolving economy. The study predicts that the value of remittances and money transfers through alternate digital payment instruments will double to about 30% by 2020.
Many critics suggest that small ticket transactions that are common in retail are not digitised and that’s because of the poor acceptance network in India. There are about 1.2 million points of sale (POS) terminals in India. This is a small amount compared to 13 million in the US.
Economists from the World Bank predict mobile applications will become ubiquitous and most transactions will be mobile-to-mobile. Small payments that have a problem of time or change will gradually veer towards mobile. Sure enough, digital payments will prove to be addictive. About 81% of existing mobile wallet payment users preferred it to other non-cash payment methods.
Reserve Bank of India (RBI) data shows that mobile wallets have already surpassed mobile banking in volume terms. The volume of mobile wallet transactions doubled during April 2015-February 2016 period to cross Rs.55 crores. Mobile wallet users have grown five times to 150 million in two years.These are easy to operate, are secure, and often a life saver!
November 21 , 2016
This entry was posted in Mobile wallets
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