Exploring The Changing Landscape Of The Indian Payments Industry

Recently, Nasscom released a research report on the digital payments findings and predictions for 2025. Here, we have put together the highlights from the report.

Digital payments have increased in volume every five years. And they’re expected to increase 16X by 2025. Globally, India ranks top in the number of real-time digital payments. While the early 2000s saw a preference for credit cards, in the future, low-cost mass-reach, interoperable payment platforms based on UPI systems will be preferable.

Digital transactions have increased post the COVID-19 pandemic. Evolving technology and cloud-native development will boost innovation in the digital payments industry. Innovation and improvement in cybersecurity will increase trust giving a boost to digital payments. Improvements in mobile capabilities, such as 5G Internet, will boost mobile banking

Mobile commerce will sustain 25 to 27% CAGR through 2025. 60 to 70% of the Indian population is expected to move to urban areas and have better disposable income. Collaboration between fintech and BFSI will drive innovations, such as the New Umbrella Entities (NUE)

As per the two bodies, the country will see better fraud management and data security systems which will enhance digital payments. KYC policies will be simplified, digitised, and centralized. Interoperable and offline payment infrastructure will also make digital payment stronger in India.

Refer to these charts by PWC that throw light on how the Indian digital payments market has grown and will grow in the next couple of years.

So far we’ve seen the numbers and figures that are driving a monumental change in the Indian digital payments industry. Now, let’s understand the key factors driving the digital payments industry.

Indian customers’ payment behaviour has changed a lot in the last couple of years. People have become more open to new and digital payment methods. FinTechs and PayTechs are making payments easier for customers. Additionally, customers' journeys have also changed in the physical and digital spaces with the introduction of digital capabilities and new elements.

One of the biggest reasons for the evolution and rampant growth of the digital payments industry in India is technological advancements that are enhancing digital payments. For instance, technology such as cloud hosting and open APIs are enabling companies to offer platforms as a service among other new products. Moreover, many ecosystem-based platforms are making it easy for platforms to integrate payment processes. These are just a few of the technology-related factors that are driving the digital payments sector in India.

Another interesting trend in the digital payment landscape is the addition of non-banking-related players. For instance, many messaging platforms are now offering digital payment options to users. The new players are introducing novel business models, such as value-added services, cross-selling of products and overlay services.

All these factors being introduced by tech giants and industries that were earlier not related to payments are now creating a positive wave in the payments industry. And the good news is, users are accepting these new trends.

India is also seeing many regulatory initiatives by the government and policymakers that are supporting the digital payments landscape. For instance, the Payments Infrastructure Development Fund (PIDF) has been created to push payments infrastructure in the country. Also, guidelines on offline payment, tokenization and regulatory sandbox are favouring the growth of the payment industry in India.

Here’s looking into the payment methods that are enabling the growth of digital payments in India:

UPI comprises instant real-time payment methods that are connected with users’ bank accounts. This mobile-based payment system has seen a significant increase in adoption by users.

Here are some statistics:

BNPL is a payment method that allows customers to make payments in parts. This split-payment method has seen tremendous growth in the last few years, especially with the younger generation.

Consider these statistics:

Debit, credit, and prepaid cards have been around for many years and are one of the strongest financial instruments that have contributed to the growth of India’s digital payment landscape. However, recent changes in regulations around the usage storage of card details are changing the way cards are being used.

Consider these statistics:

PPI is a digital instrument that stores money in it. Users can make payments using their prepaid balance. Some examples of PPI are gift cards, travel cards, forex cards, prepaid wallets, etc.

Here are some figures around PPI:

International or cross-border payments have played a huge role in expanding the Indian economy. Initiatives by FinTech companies, such as Money Transfer Service Schemes (MTSS), partnerships between Indian banks and exchange houses, the International Financial System (IFS) and faster payments have all improved the cross-border payments ecosystem.

The future of India’s digital payment landscape is looking bright because of many reasons. In this section, we explore the different factors that support digital payments.

The expansion of tokenization, the process of creating a digital representation of a real thing and protecting data, will have a great impact on the future of digital payments. Whereas earlier tokenization was limited to mobile devices, with its expansion to laptops, desktops, wearables, etc. As customers start using more of these devices for eCommerce transactions, tokenization will boost transactions.

Along with online payments, offline payments, too, are increasingly evolving. There are many locations that may not receive uninterrupted internet networks and that’s where offline payments come in. Offline payments help solve the problem of non-inclusion of locations and people who are located in remote places or who may belong to a segment that has minimal banking facilities.

This has prompted many service providers to offer offline payment solutions. Recent RBI guidelines support offline payments. Offline payments are used for transit, money transfers, microfinance, microinsurance, toll transactions, bill payments, in-store and in-flight payments.

Indian FinTech has brought many changes to the corporate payments landscape in the country. Corporate payment platforms have made real-time payments easier and brought transparency and security. Financial institutions and service providers are identifying and filling gaps in the payment structure of organizations, giving a boost to corporate payment capabilities.

Some of the key focus areas are:

The development of payment infrastructure has seen tremendous growth in India in the last few years. From UPI, UPI QR infrastructure, MDR for person-to-merchant transactions, POS infrastructure, the expansion of tokenization, expansion of payments infrastructure in tier 2 and tier 3 cities, RBI’s PIDF scheme, etc., have given a push to the digital payment landscape in India.

To further enhance the ongoing discussion on the changing landscape of the Indian payments industry, it's crucial to highlight how GoKwik's Kwik Pay is playing a pivotal role in this evolution. GoKwik's Kwik Pay is transforming the eCommerce payments scene by partnering with multiple payment gateways and aggregators, ensuring a wide variety of payment options for online shoppers. This integration supports the highest transaction success rates, minimizing failed transactions. For users at higher RTO risk, Kwik Pay offers Partial COD, allowing them to pay a minimal amount upfront instead of blocking COD payments entirely.

Moreover, Kwik Pay guarantees secure payments with low failure rates across all methods, providing 100% payment assurance. The Buyer Protection feature reassures customers about the seller's reputation, enhancing trust and confidence in their purchases. In cases of payment failures or order cancellations, Kwik Pay ensures quick and instant refunds across all payment modes, further enhancing customer satisfaction and loyalty.

By integrating these comprehensive features, GoKwik's Kwik Pay is not only facilitating seamless transactions but also significantly contributing to the growth and reliability of the Indian eCommerce payment landscape.

A lot is going on and yet to happen in the digital payments space in India. And there’s one common thread between all these initiatives — customer experience and convenience. Financial institutions and other companies are focusing on bringing convenience through digital payments.

Moreover, the consumer or user has evolved and demands the best digital experiences. That’s why having an integrated payment solution is extremely important, no matter the industry or type of business. Automation, faster transactions, higher security, ease of use, etc. are key parameters that customers consider when using an app or website or tool of any business. One experience can make or break any business.

Hence, choose the right kind of integrated payment solution for your online business.