UPI, pay later to drive payments in coming yrs

MUMBAI: With state-owned unified payments interface (UPI) leading the way, the digital payments ecosystem in India will also be driven by buy-now-paylater (BNPL), digital currency and corporate payments and offline payments, according to a report by PWC India.

The report provides insights into the digital payments landscape and key factors that are influencing customer’s spending behaviour.

It also looks at upcoming trends in payments such as BNPL, E-RUPI, central bank digital currency (CBDC) and offline payments, and how the ecosystem is likely to adapt to the emerging trends.

The report titled The Indian Payments Handbook 2021-26, said domestic digital payments grew at a compound annual growth rate (CAGR) of 23% by volume and is likely to touch 217 billion in transactions by FY26.

“We expect the payments industry to focus heavily on enhancing customer experience and providing customer options for payment, enhancing security, undertaking innovations in technology like distributed ledger technology (DLT) and emerging tech such as Internet-of-things (IOT) over the next couple of years,” Mihir Gandhi, partner and payments transformation leader, PWC India, said.

UPI has contributed significantly to this growth, reaching a record 22 billion transactions in FY21, PWC said, adding that UPI transactions are expected to be at 169 billion by 2025–26, at a CAGR of 122% since 2018. The report laid down some key trends that will contribute to the growth of the digital payments industry in India. It said existing products will continue to make inroads and gain wallet share of Indian customers and enable new use cases on UPI, Fastag and cards to drive growth in transaction numbers, it added.

With RBI expanding the scope of tokenization to cover additional consumer devices such as laptops, desktops, wearables, and IOT, along with card-on-file tokenization, PWC said RNI will also enhance card-related security, and ensure overall customer check-out experience remains intact.

According to the report, offline payments will contribute to growth of digital payments in India, as poor connectivity and limited access to online payment tools have opened up an opportunity for offline payments. “The RBI guidelines on offline payments have provided the muchneeded impetus to the segment,” it added. In March, the Reserve Bank of India (RBI) launched UPI for feature phones, bringing 400 million users under its ambit. Feature, or basic phones, typically provide voice calling and text messaging functions.

Besides, the proposed central bank digital currency (CBDC) could also be a game-changer, with the government announcing a rollout by RBI in FY23.