Indian households to make 50% non-cash transactions by FY26: Redseer

According to a report released by strategy consulting firm Redseer Strategy Consultants in collaboration with Plural by Pine labs, 85% of the businesses in India will be digitally enabled by FY26. From bustling cities to remote villages, digital payments are on the fast track to change the way users transact. Penetration of smartphones and the internet, and favorable government policies have been key drivers in the adoption of digital payments in the country. With more than 70 crore internet users, India has the second-highest number of internet users in the world, trailing only behind China.  With a population of 140 Cr, India is poised to become a global leader in digital payments in the coming years.

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Commenting on the report, B Amrish Rau, CEO, Pine Labs said, “From the foundational work on the JAM trinity to the development of India Stack, India has quietly orchestrated a revolution in online payments. These insights coming from the Redseer analysis especially on the BBPS and UPI adoption are a tell-tale sign of things to come. The future is increased tech-enabled digitization at the online and offline point of sale and at Pine Labs we are happy to be playing a part in it.”
According to the report, the rise of first-time e-Commerce users during the COVID years accelerated the adoption of digital payments.  The Indian e-Commerce market, which is currently at ~ INR 400K Cr, is expected to reach ~INR 900K Cr by FY26, with customers from Tier-2 and smaller cities driving most ofthis growth. Jasbir Juneja, Partner at Redseer, further adds, “Our research suggests that online shoppers in India are expected to grow by 50% in the coming three years to reach >30 Cr by FY26, further paving the way for the reach of online payments in the country”.

Indian households make ~35% of transactions digitally, with Pay-to-Merchant payments (P2M) accounting for a significant proportion of transactions. Customers use digital payment methods in 80% of grocery, food delivery, and travel transactions. With mobile phones facilitating seamless P2M payments, digital transactions by households are estimated to cross ~50% by FY26.

As more customers have adopted digital payments, businesses have also responded by leveraging technologies to enable digital transactions. The report estimates that ~75% of the ~7 Cr businesses in India are digitally enabled, and the number is expected to rise to 85% by FY26. UPI captures the biggest share of the payments market, accounting for 84% of the total digital payments volume as of FY23. BBPS, an ecosystem facilitating various bill payments, is set to witness a compound annual growth rate (CAGR) of approximately 30% between 2023 and 2026.

Financial products and services such as embedded credit, embedded insurance, and embedded finance can increase business revenue, reduce the cost of customer acquisition, smoothen customer journeys, and provide a competitive edge.

The RBI conceptualized payment system, BBPS driven by National Payments Corporation of India (NPCI) also finds a mention in the Redseer report. As per the Redseer findings, BBPS is poised to witness a 30% increase in transaction volumes and increase from 110 crore transactions in FY23 to 240 crores by FY26.

The report concludes with emerging trends to look out for, such as e-Rupi/CBDC, voice payments, wearable payment devices, and biometric payments, which could further foster greater collaboration between fintech companies, businesses and the government.

To View the complete report, click here. https://shorturl.at/asRV6