Here Are The Top Trends Shaping India’s Payment Scene

Here Are The Top Trends Shaping India’s Payment Scene

by May 3, 2022

India’s digital payments space has seen a massive boom over the past few years, a growth that’s been supported by an expanding e-commerce marketplace and the wider availability of acceptance infrastructure at physical stores.

Building on the rise in digital payment adoption induced by COVID-19 and growing collaborations between fintechs and traditional financial services providers, the payments industry will continue to evolve rapidly over the next two years with more developments expected to take place in areas including contactless payments, the Internet-of-Things (IoT) payments, artificial intelligence/machine learning (AI/ML), and distributed ledger technology (DLT).

These are the predictions made by consulting firm PwC in a new report titled The India payments handbook – 2021 – 2026. The report looks at the current and future digital payments landscape in India, analyzing the year gone by, the progress made by the payments’ ecosystem in the last few years, and emerging trends.

According to the firm, contactless or zero touch payments will gain traction over the next couple of years as users embrace these payment methods for the superior customer experience they provide. In particular, growing usage of the United Payments Interface (UPI), India’s instant real-time payment system, will be setting the foundation for booming adoption of contactless payments, the report says.



As more users turn to contactless payments, PwC expects new fintech players to continue flocking into the Indian market. These players will look to monetize customer data, adopt more user-centric approaches, and embrace technologies including AI, ML and blockchain to offer more innovative and customized solutions.

AI and ML solutions will allow them to gain deep insights into customer preferences, build targeted offers, improve fraud management, and enhance credit decisioning. These technologies will also allow them to automate operational activities, bringing efficiency into the overall payments value chain.

Besides AI and ML, payment players will also continue experimenting with DLT and smart contracts with hopes for faster movement of funds, reduced cost and improved efficiency.

Another major trend to look forward to in the Indian payment space is IoT payments. As customers continue to adopt connected devices and upgrade to smart homes, IoT embedded with payments will emerge as the next area of exploration, PwC predicts.

IoT payments will be further propelled by supportive regulations introduced over the past couple of years.

Since at least 2019, the Reserve Bank of India (RBI) has been setting the foundation for more secure payment transactions by first permitting authorized card payment networks to offer card tokenization services.

Tokenization refers to the replacement of actual card details with an unique alternate code called the token. The method is deemed safer because card details are not shared with the merchant during a transaction.

The move was followed a few years later by a ban on the storage of customer card credentials by payment aggregators and merchants.

Last year, the tokenization framework was extended to include consumer devices such as laptops, desktops, wearables (wrist watches and bands) and IoT devices amid a rapid uptake in volume of tokenized card transactions.

India’s digital payments space has been growing at an impressive annual compound growth rate (CAGR) of 30%. UPI has contributed significantly to this growth, reaching a record of 22 billion transactions in 2020-2021. By 2025-2026, UPI transactions are expected to cross 160 billion.

UPI transaction volumes in India, Source: The India payments handbook – 2021 – 2026, PwC

UPI transaction volumes in India, Source: The India payments handbook – 2021 – 2026, PwC

Buy now, pay later (BNPL) arrangements are another payment option that has been growing rapidly in India. Currently estimated at INR 363 billion (US$4.7 billion), BNPL is expected to reach INR 3,191 billion (US$41.6 billion) by the end of 2025-2026. It’s estimated that by the end of 2022, BNPL users will reach upwards of 15 million.

BNPL transaction value (in INR billion), Source: The India payments handbook – 2021 – 2026, PwC

BNPL transaction value (in INR billion), Source: The India payments handbook – 2021 – 2026, PwC

The number of acceptance points for digital payments and acquisition of point-of-sale (PoS) devices have seen a steady rise as well. By the end of 2022, the number of these devices is projected to reach 5.4 million. Similarly, deployment of QR codes has also been surging and is expected to reach 170 million by the end of fiscal year 2025-2026.

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