India's Digital Payments Market Expected to Witness 3X Growth, Set to Touch 7,092 trillion by 2025

India's Digital Payments Market Expected to Witness 3X Growth, Set to Touch Rs. 7,092 trillion by 2025


Digital payments in India are expected to grow over three-folds to 7,092 trillion by 2025 on account of government policies around financial inclusion and growing digitization of merchants, according to a research report.

RedSeer Consulting, the Bangalore-based management consulting company stated that the India’s digital payment market was worth around 2,162 trillion in 2019-20. “The current 160 million unique mobile payment users will multiply by five times to reach nearly 800 million by 2025. This growth will be driven by a number of demand and supply-side drivers,” added the management consultancy.

“Mobile payments will drive around 3.5 per cent of total digital payments of 7,092 trillion by financial year 2025, up from the current one percent. The total mobile payment users who currently stand at about 162 million would reach around 800 million during this period,” the report said.

According to the report, wallets will continue to play a key role in its growth with the continuous increase in both frequency and user base. By 2025, wallets are expected to have a higher penetration and lower income would eventually drive multiple small-ticket transactions, it said.

RedSeer, which serves various e-commerce companies and venture capitalists including Tiger Global, estimates that the growth of digital payments specifically will come out by increasing penetration with offline merchants and the penetration with the unorganized retail sector will grow on the back of increased merchant digitization in cities beyond tier II.

Redseer sees COVID-19 as a catalyst to digital payments across India. “COVID-19 seems like another demonetization-like catalyst for the industry. Digital payment providers have been quite hands-on in terms of responding to this situation, by offering enhanced support on essentials such as offering groceries, masks, sanitizers, COVID-19 insurance, offering integration with donations to PM fund and other essential product and services,” says Anil Kumar, Founder & CEO, RedSeer Consulting.

According to RedSeer, digital payments share of grocery stores increased to 75 percent due to COVID-19 as people preferred paying through mobile phone due to safety concerns.

“There is significant headroom for growth of EDC (electronics data capture) terminals in the small retailer universe. Large and mid-sized retailers use more than two EDC terminals. Today we have around five million terminals, which is almost five times that in financial year 2015,” the report said. According to the report, the payment gateway aggregator market in India, which is currently estimated to be at 9.5 trillion, is expected to grow by 2.4 times driven by large value transactions. It is expected to grow at a compounded annual growth rate of 19 percent in the next five years to reach 22.6 trillion by FY 2025.

“The payment gateway market today is very competitive, and all leading players are fighting for the market share. Paytm leads this pack and has grown the fastest followed by BillDesk with marquee government clients,” the report said.