While Google’s Tez app has already played a big role in catapulting digital payments, a big boost will come from WhatsApp and Facebook and other messaging apps building this into their platforms.
Digital payments in India, currently estimated at around $200 billion, are projected to rise fivefold in the next five years to touch $1 trillion, according to an estimate made by Credit Suisse. At this point, the value of digital payments will rise from around 10% right now to around 25%, the study adds. While Google’s Tez app has already played a big role in catapulting digital payments, a big boost will come from WhatsApp and Facebook and other messaging apps building this into their platforms. Growing steadily since the launch of the BHIM or Bharat Interface for Money app and by leaps and bounds since Google Tez took it up, the Unified Payments Interface (UPI) channel has overtaken mobile wallets in terms of the monthly value of transactions. According to data released by the Reserve Bank of India, November 2017 saw a total of 105 million UPI transactions worth Rs 9,640 crore, against 187 million mobile wallet transactions worth Rs 9,388 crore. What’s more, taken together, the UPI and mobile-wallet transaction values are now equivalent to a quarter of the value of card transactions made at point of sale terminals. In November, UPI and wallets were used for transactions worth Rs 19,028 crore, while the combined value of debit and credit card transactions stood at Rs 75,779 crore.
A recent report by Credit Suisse says that as Google and then Paytm enabled UPI transactions, the volume of payments through the channel has seen a massive surge, with transaction volumes on Tez now at a par with non-cash transactions recorded by Axis Bank, which is the fourth-largest bank in terms of digital transactions. As more global technology players follow in the footsteps of Google and Samsung to corner a share of the Indian payments market, digital transactions are set for further growth, Credit Suisse said. “WhatsApp, with 230 million daily average users, is by far the most popular app in India and as it soon plans to integrate a payments button, digital payments are set to explode and we estimate a US$1 trillion market over the next five years,” Credit Suisse said.
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The report further states that with 800 million bank accounts now linked to Aadhaar, the bulk of existing bank accounts are mobile-transaction ready. This will encourage global technology majors to partner the banks leading the digital payments game in India. “The top four banks — State Bank of India, HDFC Bank, ICICI Bank and Axis Bank — together account for over one-third of bank system customer base but drive 60-70% of retail activity levels. The tech aggregators will primarily look to tie up with these franchises,” Credit Suisse said. As more customers migrate to digital, banks will also be able to prune operating costs and create new lending opportunities, according to the investment bank.