Digital payments to reach $500 billion by 2020, contribute 15% to India's GDP: Google-BCG survey

Slowly yet steadily, digital payments seem to be gaining traction in India. The growth has been driven by many factors such as smartphone penetration, Internet, e-commerce, growing dependence of apps and more. A new report now highlights that by 2020, the size of digital payments industry in India will be $500 billion. It will contribute 15 percent to India’s GDP. According to the report, convenience is considered to be the most important factor driving this growth, and it is followed by availability of offers when a user opts for digital payment methods. The report titled ‘Digital Payments 2020’ has been formed by Google and Boston Consulting Group (BCG). It has sketched the current transformation in digital payments and how it will impact the overall landscape in India. The report has qualitative and quantitative research executed by Nielsen. The consumer survey covered over 3,500 respondents including consumers, merchants and remittance users from nine geographies, and Nielsen conducted 14 group discussions, and 26 in-depth interviews for users and merchants in 3 cities (Mumbai, Lucknow, Delhi).  The report further highlights that non-cash contribution in the consumer payments segment will double to 40 percent. Currently, 81 percent of existing digital payment users prefer it. Online shopping, paying utility bills and buying movie tickets are considered among the top three things. 90 percent Indian consumers are likely to use digital payments for both online and offline transactions, and more than 60 percent will be contributed by offline points of sale like eateries, transport, etc. Speaking about the key findings of the report, Rajan Anandan, VP, SEA & India, Google said, “Spurred by smartphone penetration, and supported by progressive regulatory policy, the digital payments industry is at an inflection point and is set to grow 10X by 2020. It is telling that half of India’s internet users will use digital payments and that the top 100 million users will drive 70% of the GMV - a clear indicator of the growing importance of the digital consumer.” According to the report, micro-transactions will form a substantial portion of the industry. More than 50 percent of person-to-merchant transactions are expected to be under Rs 100. The report also estimates that remittances and money transfer will go alternate digital payment instruments and double to 30 percent by 2020. The report also talks about the various hurdles that the digital payments ecosystem will need to pass. During the research, about 1-2 non users said they found the product very complicated to understand. On the other hand, 61 non-user merchants also find digital payments complex to use. 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% 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.