Consumers prefer digital payments over cash this festive season

Digital payments are the preferred payment option for 42 per cent of consumers in India, leading card payments (29 per cent) and cash (27 per cent), according to a new online study conducted by YouGov and ACI Worldwide, a leading global provider of real-time electronic payment and banking solutions. 

While preference for digital payments – including eWallet and UPI payments – is more pronounced with younger consumers (42 per cent for Gen Z and 48 per cent for Millennials), the survey revealed a more consistent picture across age groups in terms of adoption. 77 per cent of Millennials had used digital payments at least once during the festival season, compared to 72 per cent of Gen Z and 69 per cent of Gen X. Nearly half (45 per cent) of Baby Boomers also indicated they had used digitals payments within the survey period. 

“Digital payments, including UPI and other eWallets, are increasingly the payment method of choice across a wide spectrum of consumers in India,” said Kaushik Roy, Vice President & Country Leader – South Asia, ACI Worldwide. “While there is still a perception that UPI, for example, is primarily for the peer-to-peer channel, this study shows that significant inroads are being made in the merchant payments channel. With monthly transactions on the UPI platform nearing one billion, and credit and debit card usage at the POS experiencing double-digit annual growth, digital and card payments will continue to make inroads into the cash economy.”

44 per cent of respondents used digital payment methods for low-value payment (less than Rs 1,000) via a merchant website (eCommerce) or app (P2M), indicative of the progress made by digital payments in the merchant channel. However, banks, fintechs and merchants should be aware that 40 per cent of those surveyed consider data privacy as a top area of concern when it comes to digital payments. 

Payment behaviours and spending patterns

  • 43 per cent of respondents used digital payment methods regularly (at least 2-3 times per week) during the festival period, with 15 per cent purchasing this way once or more per day.
  • 32 per cent have not used cash for festival season purchases, indicating that for some, festival season spending is becoming a largely cashless affair.
  • Only one in ten respondents (10 per cent) claimed to have not made a digital payment method at all in the period leading up to Diwali.
  • Peer-to-peer (P2P) payments were made by 36 per cent of respondents for low-value payments (less than Rs 1,000) and 37 per cent for high-value payments (more than Rs 1,000) during the festival season.

Consumer concerns and industry opportunities

  • Internet connectivity (a prerequisite to most digital payment methods) is a top concern for 44 per cent, while failed transactions (36 per cent), problems processing refunds (32 per cent) and fraud (29 per cent) also identified as major concerns.
  • Only 21 per cent of respondents cited lack of clarity about fees as a top concern and 23 per cent lack of acceptance infrastructure at merchants, reflecting increasing ease of use for customers and greater merchant acceptance.
  • Queried about what would encourage more frequent usage of digital payments, 42 per cent said better rewards (discounts, incentives or cashbacks); 24 per cent cited faster and more frictionless checkout.

As per data released by NPCI, UPI transactions hit an all-time high of 955.02 million in September 2019 as compared to 918.35 million in August. There has been a 135 per cent YoY increase in the number of transactions and UPI is soon expected to cross one billion monthly transactions.

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