India's digital payments will grow 10-fold in the next four years to touch $500 billion by 2020, a joint report by Google and Boston Consulting Group said. By 2023, the report says non-cash transactions in India will surpass cash transactions. 

"Aadhaar will bring India to a point where the country will no doubt be the most advanced digital payment economy in the world," said Rajan Anandan, VP, SEA & India, Google.

The report projects that by 2020, the size of the digital payments industry in India will be $500 billion, contributing 15 per cent to India’s GDP. Further, by 2020, the non-cash contribution in the consumer payments segment will double to 40 per cent. Already 81 per cent of existing digital payment users prefer it to any other non-cash payment method. Online shopping, payment of utility bills and buying movie tickets have emerged as the three top things that a user primarily interacts with. 

Further, the report reveals that Indian consumers are 90 per cent as likely to use digital payments for both online as well as offline transactions. Over 60 per cent of digital payments value will be contributed by offline points of sale such as unorganised retail, eateries and transport.  

“It is telling that half of India’s internet users will use digital payments and that the top 100 million users will drive 70 per cent of the GMV, a clear indicator of the growing importance of the digital consumer,” Anandan said. 

Anandan added that Indians are actively trying to understand more about digital wallets as the search giant saw a 20 times increase in queries for digital wallets. 

“Global digital payments are undergoing rapid transformation and are set to grow four times in value by 2020. India is on an even more exponential growth trajectory. The smartphone explosion will usher in a new era in digital payments in India over the next few years that will see digital payments exceed $500 billion by 2020 and non-cash transactions exceed cash transactions by 2023,” said Alpesh Shah, Senior Partner & Managing Director, The Boston Consulting Group, India.

Based on the research conducted, convenience has emerged as the most important factor that is driving this growth. This is followed by availability of offers while opting for digital payment methods.  

The report also highlights that micro-transactions will form a substantial portion of the industry, with over 50 per cent of person-to-merchant transactions expected to be under Rs 100. The report predicts that the value of remittances and money transfer that will pass through alternate digital payment instruments will double to 30 per cent by 2020. 

The report identifies the various challenges that the digital payments ecosystem will need to overcome in order for the industry to grow to its potential. The research has shown that 1 of 2 non-users haven’t used digital payments because they found the product too complicated to understand and 61 per cent of non-user merchants find it complex to use. Additionally, universality of acceptance of digital payment methods and merchant concerns around speed of transactions during peak hours have emerged as other inhibitors to usage. 

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