Indian P2P Payments Set To Outstrip Cash

Mobile payments are forecast to take the top spot in India

Cash, historically dominant in India, clung to its top ranking among payment methods for a year longer than expected because of Covid-related disruption, but the latest India cards and digital payments report from Argus Advisory Research expects mobile-based P2P to move swiftly into the top spot this year.

As the trajectories in the chart below show, cash is unlikely to ever dominate this market again. A burgeoning telecommunication industry, dynamic regulatory environment and successful payments infrastructure have set the stage for a boom in consumer payments. Indeed, Google has written a letter to the US Federal Reserve about India's scalable architecture for payments, suggesting that it could be replicated in the United States.

While a two-pronged approach of regulation and infrastructure has certainly been the major factor, the impact of the pandemic has fast-forwarded the future of payments, propelling it into the spotlight.

It had been expected that cash would relinquish its dominating position after 2019, but a Covid quandary then occurred whereby Indians opted to hoard cash, causing circulation to increase temporarily. However, we consider this to be an anomaly and, as early as next year, forecast that cash will lose its top spot here to mobile payments.

Apps gamble on interoperable QR codes

Card use is steadily growing among the population, but the rapid growth in mobile payments suggests that cards are being leapfrogged as a developmental milestone. The vast majority of mobile payments lie within the app-based P2P sector. Mobile payment firms are all trying to build a critical mass of users on their apps in order to roll out payment methods that can be more easily monetised – such as the QR code.

This gamble could well pay off as the QR acceptance infrastructure already dwarfs that of traditional POS terminals, and QR is now the prevalent technology for payments at the POS in terms of transactions. Add to this a zero-fee policy for the method and a regulatory requirement to make all QR codes interoperable by 2022, and the future of QR codes looks extremely bright in this market.

India is a rapidly-evolving payments space that offers strong indications of how payments will develop in other markets in that region and even worldwide.

Argus Advisory Research's India Country Report is available to order now and includes pages of detailed data on and insightful analysis of consumer payments, mobile payments, card issuing, acquiring, and more. To request a sample or no-obligation demonstration, please contact us.