Fiscal year 2020 will witness the death of the digital wallet, and non-cash transactions are likely to overtake cash payments in India by 2023, predicts Harshil Mathur, co-founder and CEO of payments solutions start-up Razorpay.

“Users of wallets are not updating their KYC (know your customer) details. Instead, they are using UPI (Unified Payment Interface) to make digital payments,” Mathur told BusinessLine.

The P2M (person-to-merchant) share of digital wallet transactions enabled by Razorpay in the just concluded fiscal (2019) dropped sharply to 1.87 per cent from 6.3 per cent in FY18, while UPI payments shot up from 1.6 per cent in FY18 to 17 per cent. UPI has created a new market segment,” he added.

Card transactions dominated with 56.48 per cent share in FY19. It was followed by net banking with 23.8 per cent.

The top three sectors that attracted digital payments were travel, utilities and e-commerce.

Even in the case of P2P (person-to-person) transactions enabled by Razorpay, the start-up saw a steep drop in digital wallet transactions from 6 per cent in FY18 to 1.5 per cent in FY19. UPI payments rose to 22 per cent in FY19 from 4.04 per cent in the previous fiscal.

These statistics are part of the start-up’s The Era of Rising Fintech report.

It analyses digital transaction modes, online spending patterns and the impact of UPI based on transactions on the Razorpay platform.

Rise in digital payments

“We saw that small and medium businesses in Tier-I and -II cities are driving solid growth of 75 per cent in non-cash transactions enabled by Razorpay,” Mathur said.

“Since demonetisation and the launch of UPI, merchant demand for digital payments has increased by 70 per cent year-on-year. Among the many sectors embracing digital payments, the fact that utilities shot up tremendously to 17 per cent in FY19 from just 2.4 per cent in FY18 indicates how consumers are taking to digital payments to pay their monthly bills,” he added.

Karnataka topped as the State with maximum digital transactions on Razorpay, followed by Andhra Pradesh and Maharashtra.

However, Pune topped the city list, with the highest average digital spend — per person per month — of ₹16,513.

It was followed by Chennai at ₹14,208 and Bengaluru at ₹14,000.

Focus on Tier-II, -III cities

Razorpay predicts that by 2020, 40 per cent of digital payment transactions in the country will be driven by businesses and consumers in Tier-II and -III cities, and 50 per cent of internet users will be using digital payments.

“Total payments via digital instruments are expected to be between $400-500 billion in 2020, up from $50 billion in 2017,” he said.

Established in 2014, Razorpay provides tech payment solutions to over 200,000 businesses.

Founded by alumni of IIT-Roorkee — Shashank Kumar and Harshil Mathur — Razorpay is the second Indian company to be a part of Silicon Valley’s largest tech accelerator, Y Combinator.