Survey highlights the dominance of UPI in making digital payments, but merchants remain concerned about managing cash flows and prefer cash payments
QR codes of digital payment are seen on the counter of a grocery store in Ahmedabad, India.
Image: Reuters/Amit Dave
India’s push towards the adoption of an economy of less-cash and more-digital solutions continues relentlessly. A latest Kearney India and Amazon Pay India report on ‘How urban India pays’ shows that 90 percent of respondents favour digital payments for online purchases, while nearly half extend this preference to brick-and-mortar stores.
As of FY24, the Unified Payments Interface (UPI) continues to be the most popular, with a 68 percent market share of retail digital payments in India, valued at $3.6 trillion. Aadhaar-enabled payments system (AePS), BHIM, IMPS and others constitute 23 percent, followed by credit cards with 6 percent and debit cards with just 2 percent.
The survey spanned 120 cities, 6,000 consumers and over 1,000 merchants across India, and was conducted in the first quarter of 2024, at a time when regulatory action against some fintechs was at its peak.
The study forecasts that the next wave of growth will emerge from small cities (with populations of 5 lakh to 15 lakh) and towns (with population of less than 5 lakh). “The next wave of growth in digital payments will be fueled by increasing penetration in segments with lower degrees of digital payment usage [DDPU], such as consumers in lower income groups and smaller towns, along with enhancing the value of spending via digital modes of payment in the higher DDPU segments by addressing their concerns,” the Kearney report says.
The DDPU uses three metrics: Volume (digital transaction frequency), variety (diversity of categories for digital payments), and openness (awareness and receptiveness toward emerging digital payment methods). The DDPU analysis indicates that income level is the most influential factor affecting digital payment usage.