Market Trends of India Payments Industry
This section covers the major market trends shaping the India Payments Market according to our research experts:
Robust Growth of E-commerce and Rise of M-commerce is Expected to Drive the Payments Market
- India's e-commerce market continues to see strong growth rates propelled by rising smartphone penetration, rising internet penetration, and increasing consumer wealth. E-commerce increasingly attracts customers from tier II and tier III cities where people have limited access to brands but have high aspirations. The rise in E-commerce is further supported by the rising use of digital payments and Buy Now Pay Later services in the region.
- Digital payments are emerging as the preferred E-commerce payment method and are further expected to retain the majority share in the coming years; local digital wallets such as Paytm, MobiKwik, and PhonePe compete with Google Pay, Amazon Pay, and others for this growing E-commerce market.
- Furthermore, real-time payment services like Buy Now Pay Later are gradually making their way as popular payment checkout solutions as an alternative to credit cards for the E-commerce market. The E-commerce giants in the region, such as Flipkart and Amazon, offer Flipkart Pay Later and Amazon Pay Later services to the consumers in the region, further paving the way for the popularity of real-time payment services in the E-commerce market.
- Moreover, the region has witnessed a rising trend in the adoption of mobile commerce in the past few years. Online retailers in the region are their growing reach in towns and cities beyond metros is driven by increased usage of mobile internet. Increased ownership of smartphones is helping more Indians access shopping websites quickly on their phone. Further supported by the variety of payment checkout solutions available such as UPI, Phonepe, Paytm, and Amazon Pay on their mobile.
- Furthermore, many leading banks in the country, such as SBI, HDFC, ICICI, AXIS, etc., offer customer-friendly online shopping credit card deals ensuring value addition. Many banks in the region have tie-up with E-commerce giants to provide credit cards, which provide excellent value addition on online shopping, such as Flipkart Axis bank credit card, ICICI Amazon Pay credit card, HDFC Regalia credit card, Etc. These type of credit cards offers discounts and rewards for online shopping to the credit cardholders, further boosting the use of credit cards for online shopping in the region.
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Real-Time Payment Systems segment are expected to gain significant traction
- UPI has proven to make the lives of many Indian users much easier. UPI is a popular real-time payment method that allows users to transfer funds from one bank account to the other instantly. There are several benefits associated with the UPI payments system, such as hassle-free online payments anywhere, a safe and secure mode of money transfer, and Users can make payments by scanning QR codes. These factors resulted in the dramatic rise of the UPI payments system as a preferred payment system in India.
- Some unique aspects of UPI payment include decoupling the funding source's payment address, further growing its adoption among Indian consumers. A UPI ID relates a merchant or an individual to their bank account and removes the need to share bank account details while initiating a fund transfer. Users can easily reassign the payment address to another bank account at any time without the hassle of informing their transacting parties, and thus UPI redefines customer relationships with banks.
- Moreover, almost every bank allows UPI transactions through mobile applications, and the UPI Payment system enables individuals to request money from any other individual, which is not an option with other payment systems like IMPS and NEFT in the region. Further, boosting the growth of the UPI payment system in the Indian payments market.
- Further, UPI is offering benefits not just for banks but also for non-banks. For instance, non-banks in India need to connect with only one sponsor bank to access UPI's central API to transfer and receive money through all UPI participating banks on the system. For example, Google Pay or Amazon Pay in India can instantly initiate a fund transfer request to and from any UPI participating bank. However, the scenario is different for fund transfers in other countries. This openness has made India's payment system a favorite destination for some of the largest technology companies in the world.
- Furthermore, the UPI payment system is further increasing mobile payments by becoming a single user interface for all of an individual's bank accounts, eliminating the need to download multiple banking apps. Most banks and non-banks have adopted the UPI payment system. For instance, as per NPCI data, the number of banks that were live on UPI increased from 220 in April 2021 to 316 in April 2022.
- All of the aforementioned factors are further expected to drive the demand for the UPI payments system in the region over the forecast period.
