India has traditionally been a cash-dominant society, a scenario that is changing gradually with a series of government measures to promote electronic payments. The country is making steady progress in reducing its dependence on cash, with its share in total payments volume expected to decline from 79.8% in 2019 to 54.1% in 2023, says GlobalData, a leading data and analytics company.
GlobalData’s report, ‘India Cards & Payments: Opportunities and Risks to 2023’, reveals that the government’s demonetization move in November 2016 triggered a massive push away from cash-based payments. Following the move, electronic payments registered significant growth. The total card payments doubled from 3.5 billion in 2016 to 7.8 billion in 2019 while the number of credit transfers grew by over four times during the period.
To further accelerate the trend, the government announced complete waiver of fees merchants must pay on payments (the merchant discount rate (MDR)) through the government-backed RuPay debit cards as well as via the Unified Payment Interface (UPI), the instant payment system, from 1 January 2020. In addition, the government has mandated that all businesses with an annual turnover of INR500m (US$7.2m) must allow payments through RuPay debit cards and UPI QR codes.
Nikhil Reddy, Payments Analyst at GlobalData, explains: “While cash continues to dominate overall payments market, electronic payments are gaining traction supported by the government initiatives, expanding payment infrastructure, rising electronic payment acceptance among SMEs, and growing consumer confidence in digital payments.”
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