If you still pay for your milk and groceries with cash, you could soon be part of a dwindling customer base.

Massive discounts, cash-back offers and vouchers by companies such as Paytm, Mobikwik and Oxigen wallet seem to be bearing fruit as digital payments are fast becoming the preferred choice of consumers.

Consider these numbers: in 2015-16, around 747 million transactions occurred through mobile wallets and prepaid cards combined. And 390 million transactions happened through mobile banking.

Digital payments, which include direct bank transfers such as RTGS and NEFT, online payments and use of mobile wallets, have grown from a mere 2 per cent in 2005 to 7 per cent in 2015 and are expected to grow 10 times in the next four years to $500 billion, according to a report by Google and Boston Consulting Group.

Rapid transformation

“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.

However, perceived complexities around digital payments and the habit of paying in cash, still act as a hurdle. Nevertheless, cash transactions in India have come down from 92 per cent of all transactions in 2005 to 78 percent now.

“Today, mobile wallets are accepted by millions of Indian users as a preferred mode of payment. Factors such as increased adoption of smartphones will contribute in driving a digital payments revolution,” said M. Sinha, COO, MobiKwik.

The interest in digital payments can be seen with Google queries for digital wallets shooting up 20 times in the last one year.

“With Aadhar, we are confident that in the next five years, India will have the most advanced digital payments ecosystem,” said Rajan Anandan, VP, SEA & India, Google. “Much like how India leapfrogged fixed internet to mobile internet, our belief is that we will leapfrog traditional payments.”

The limited acceptability of digital payments is the biggest challenge for the growth of digital payments in India, says the report.

With over 80 broad categories of spends for average households, only 15 categories are currently served by digital payments and of these, only three have seen decent transaction volumes.

These include prepaid mobile recharges, utility bill and ecommerce payments and travel bookings. The opportunity for mobile wallet firms to expand is huge.

More Like This

Published on July 25, 2016