India, a giant in the digital & payments revolution

Soon to be the third largest economy in the world, India is an expanding market filled with potential. The country of continent-sized proportions boasts a GDP of an impressive USD 3 trillion and projects growth of 9% annually until 2027. No nation is growing faster. 

Thanks to a successful set of government-led initiatives to promote financial and digital inclusion – the country today has 800 million internet subscribers, a financial account penetration of 80%, and the largest instant transfer system in the world –, India will add nearly 300 million people to its consumer class until 2030 and will be the home of the largest young market globally. 

As the Indian economic and digital landscape continues to evolve, the trends indicate a promising future for digital commerce as well, driven by a rapidly expanding tech-savvy and mobile-oriented consumer base and the expansion of purchasing power. 

According to data from EBANX's Beyond Borders study, currently, India has the second-highest number of digital buyers in the world, only behind China, with 350 million people boosting a USD 184 billion digital commerce market. 

However, despite being the world's second-largest digital buyer market, only 32% of the Indian population shops online. This makes India a market filled with potential and a must-have market for global companies looking to expand internationally. 

How digital payments innovation shapes consumption in India

India's growth path is fueled by a digital ecosystem that has been gradually developing over the past two decades. The country has made a concerted effort to bolster its technological infrastructure, marked by a series of strategic investments aimed at advancing digital connectivity and innovation. The flagship of this initiative is Aadhaar, a unique digital identity linked to a range of digital services that have positioned India as a global leader in tech-based social inclusion and paved the way for addressing financial inclusion issues.

But the great leap in India's payments market came in 2016, when UPI, a real-time payment system developed by the National Payments Corporation of India (NPCI), was introduced. Since then, digital transactions have surged to unprecedented levels, changing how individuals transfer funds, make purchases, and engage in financial activities. 

Digital payments in India grew 527% from 2017 to 2023, reaching 130 billion transactions and more than USD 4 trillion in value. 

As the Beyond Borders report shows, UPI played a significant role in transforming a cash-based economy into a digital payments-drive one, inspiring other emergent countries to follow a similar path toward economic growth through technological advances. Ultimately, the rise of digital payments in India contributed to broader economic development and the surge of a powerful digital economy. 

The UPI revolution

UPI stands as the paramount payment method in India, widely used by both individuals and businesses: over 340 million people use it on a daily basis, and about 270 million merchants accept its transfers as a payment method. Currently, UPI represents 64% of all digital payments in India. 

UPI's popularity is no wonder. Potentially, it can reach any citizen with a bank account, or nearly 80% of the population. But that's not all: the system has been proficient in developing capabilities and use cases so that it is practically everywhere. 

UPI integrates with various digital wallets, third-party apps, and banks, allowing payments through any of over 100 compatible applications nowadays. Payments can also be made using a key, like an e-mail address, linked to the recipient's account. 

It also operates through QR Codes that can be found in every kind of Indian business, from big stores to mom-and-pop shops. Using UPI's QR codes, you can pay for a tuk-tuk ride, purchase groceries, or buy a television (there are over 280 million working QR Codes across the country). 

It is even a driver for other payment service applications. For instance, fueled by their integration with UPI, apps such as Paytm, Google Pay, and PhonePe have gained widespread acceptance among consumers, offering a wide range of functionalities beyond simple peer-to-peer transfers and card storage, such as paying utility bills, booking tickets or making investments. 

Oh, and, since the launch of UPI Autopay, in July 2020, it is also possible to schedule payments. This feature is proving particularly beneficial for subscription-based services like gaming, streaming, and software, enabling individuals without credit cards to conveniently utilize their bank accounts for payment. 

UPI is payment-agnostic, app-agnostic and use-agnostic. You can link it to any bank account or to a RuPay credit card; you can use UPI on your banking app, wrapper app or mobile wallet. It works online or offline, for one-time payments, recurring payments, over-the-counter purchases, merchant payments, utility bills, and P2P transfers. 

India's digital commerce paradise

The Indian digital commerce market is one of the fastest-growing in the world, with projections to reach USD 276 billion in three years, according to PCMI (Payments and Commerce Market Intelligence). In the next four years, India's digital commerce should grow at a strong 14% annually, higher than the worldwide rate (11%).

Although mobile-led industries such as gaming and streaming are some of the fastest-growing in India's digital market, the massive number of online buyers in the country, though, makes more traditional industries such as retail and travel into huge opportunities for online sales.

Moreover, beyond its vast market of 350 million people, digital commerce in India has achieved a penetration rate of only 32%. This figure underscores the immense untapped potential for further expansion, particularly if efforts are made to enhance payment access and provide affordable methods that cater to the diverse Indian population.

In digital commerce, UPI is the absolute payment choice with a 41% share, while UPI AutoPay has about 10 million scheduled recurring payments per month and an average approval rate of 92%. Enabling UPI in digital commerce opens up a market of over 1 billion people, allowing consumers to pay the way they are most used to. 

However, India's payment landscape goes beyond UPI, and credit card spending is growing by 50% per year, only behind the instant system. With a 300 million people addressable market, 60% of credit card spending is online, which puts digital commerce as the primary use case for credit cards in the country.

To successfully navigate this market, it is necessary to diversify the payment offer to the preferred payment methods by Indian consumers, reaching a large addressable market and fostering customer loyalty.

That's all for now, folks!