Credit and finance for MSMEs: With UPI being a big disrupter in the Indian payments landscape, the next wave of disruption is expected to come from the rapid explosion of digital merchant payments, as 75 per cent merchants are now covered via QR, and through greater penetration and UPI enablement of credit cards, said a report by BCG and Matrix Partners India on Thursday. The report was based on a survey of over 125 founders and/or CXOs of fintechs and incumbents along with insights from a 4-part virtual panel discussion series held with industry thought leaders in July 2022.
The report said 29 per cent respondents believed peer-to-merchant (P2M) space to be most likely disrupted followed by payment software-as-a-solution (SaaS) space according to 28 per cent respondents. Peer-to-peer (P2P), point-of-sale or payment gateway, and prepaid/gift cards were other areas expected to be disrupted.
While UPI has kicked off a digitization wave of payments, there is significant scope for further penetration in P2M payments and also a need to reach a larger merchant base and continuously drive formalization and digitization of additional value chains, the report said.
“India has attained word leadership in payment innovation through UPI, QR acceptances, etc. We have several fintechs setting the standards at scale. However, there are still many areas where the significant potential exists to increase digital payments penetration, especially in the P2M space. Enabling more merchants, formalization will also unlock the potential of finance embedded in payments. Greater flexibility in economic models can turbocharge investments into payment innovation,” said Vivek Mandhata, Partner, BCG.
According to Statista, the P2M market in India is estimated to reach Rs 84 lakh crore by the financial year 2025 from around Rs 18 lakh crore in FY19 with Paytm, PhonePe, Google Pay, etc., among key players. The country’s digital payments industry as a whole was projected to be valued at over Rs 7,000 lakh crore by 2025.
India’s P2M payment volume in July this year stood at 299.92 crore involving Rs 2,30,725.92 crore (Rs 2.30 lakh crore) out of the total UPI transaction volume of 628.84 crore involving Rs 10.63 lakh crore, data from the National Payments Corporation of India showed.