Digital payments' volume in India to grow to 71.7% of all payment transactions by 2025: Study

India retains the top spot with 25.5 bn real-time payments transactions, followed by China with 15.7 bn transactions

Digital payments' volume in India to grow to 71.7% of all payment transactions by 2025: Study - CIO&Leader

More than 70.3 billion real-time payments transactions were processed globally in 2020, a surge of 41% compared to the previous year, as the COVID-19 pandemic dramatically accelerated trends away from cash and cheques towards greater reliance on real-time and digital payments, according to ACI Worldwide-GlobalData report. The report analyzes global real-time, account-to-account payment volumes and forecasts across 48 global markets. It projects a Compound Annual Growth Rate (CAGR) for real-time payments of 23.6% from 2020 to 2025.

According to the report, India retains the top spot with 25.5 bn real-time payments transactions, followed by China with 15.7 bn transactions. In 2020, the transaction volume share in India stood at 15.6% and 22.9% for instant payments and other electronic payments respectively, while paper-based payments had a considerable share of 61.4%. This is poised to change by 2025 where share of volume by instant payments and other electronic payments is expected to rise to 37.1% and 34.6% respectively, leaving the volume of paper-based transactions at 28.3%. Furthermore, by 2024 the share of real-time payments volume in overall electronic transactions will exceed 50%, according to the report.

“India’s journey of creating a digital financial infrastructure has been characterized by collaboration between the government, the regulator, banks and fintechs. This has helped to advance the country’s goal of enabling financial inclusion and has also provided rapid payments digitization for citizens. The pandemic has further accelerated adoption of digital payments with many first-time users adopting digital payments and significant uplift by merchants,” said Kaushik Roy, VP and head of product management, Asia, ME and Africa, ACI Worldwide. “As the industry evolves, we expect to see increased adoption across different users and volume growth driven by mass adoption, recurring payments, transit payments as well as cross-border transactions.”

As the pandemic continues to drive changes in consumer and business behaviors, banks, merchants and intermediaries across the payment ecosystem are responding rapidly, prioritizing the shift to digital to protect current revenue streams, and searching for new ones through a fully digitized customer experience.

With millions of people globally having to change the way they work and live - and the way they shop and pay - mobile wallet adoption rose to an historic high of 46% in 2020, up from 40.6% in 2019 and 18.9% in 2018. Countries like Brazil, Mexico and Malaysia where many people historically relied on cash are now some of the fastest adopters of mobile wallets.

“The pandemic has cast the spotlight on the importance of digital payments and robust payment infrastructures, condensing a decade of anticipated innovation into one year and creating human behavioral changes that will not reverse as we emerge from the crisis,” commented Jeremy Wilmot, chief product officer, ACI Worldwide. “Countries with a robust digital payments infrastructure already in place have coped better than those without when it comes to containing the economic impact of the pandemic. Real-time payments have enabled governments, working jointly with financial institutions, to accelerate much-needed disbursements and economic stimulus payments to their citizens. They have also enabled real-time liquidity to businesses that had to adapt to disrupted supply chains.”

“Real-time payments are still in a nascent stage worldwide, and mostly focused on the obvious use-case of P2P payments in many countries,” said Samuel Murrant, Lead Analyst, Payments, GlobalData. “However, the pandemic has provided an opportunity to accelerate the growth path for these instruments. As consumers become used to the speed of real-time settlement for P2P payments, they will naturally move to using them for e-commerce over the relatively slower and less convenient process of using cards online. From there, there is potential to move into in-store payments, once enough consumers recognize real-time payment brands and the user base is high enough to deliver sufficient value to merchants.”

Some of the key findings include:

Global real-time payments growth:

  • Total number of real-time transactions in 2020 were 70.3 bn, up 41% from 50.0 bn in 2019
  • The real-time share of global electronic transactions in 2020 was 9.8%, up from 7.6% in 2019; it is predicted to be 17.4% by 2025
  • The value of real-time transactions was up by 32.8% from 2019 rising from USD 69tn to USD 92tn; the expected CAGR by 2025 is 12%

Top 10 countries globally by number of real-time transactions in 2020:

  • India retains the top spot with 25.5bn real-time payments transactions, followed by China with 15.7bn transactions; South Korea is in 3rd place with 6.0bn, Thailand 4th with 5.2bn and UK is in 5th place with 2.8bn
  • Nigeria follows up in 6th place with 1.9bn transactions, Japan in 7th with 1.7bn
  • Brazil climbs into the global top 10 as number 8 due to the launch of PIX, with 1.3bn transactions driving a 58% YoY increase from 2019 to 2020. Expect to see the country climbing even higher next year with a 5-year growth prediction of 25.3% CAGR
  • The US ranks number 9 with 1.2bn transactions and Mexico ranks 10 with 942mn

Fastest growing countries for real-time payments:

  • The top spot goes to Croatia with an expected CAGR of 374.4% between 2020 and 2025, followed by Colombia (112.7%), Malaysia (83.9%), Peru (74.4%) and Finland (71.4%)
  • The highest growth region (CAGR 2020-2025) is predicted to be North America (36.5%), as both Canada and the US modernize and drive their new real-time systems (RTR and FedNow)

Global mobile wallet adoption:

  • Mobile wallet adoption rose to an historic high of 46% in 2020, up from 40.6% in 2019 and 18.9% in 2018
  • Total mobile wallet transactions amounted to 102.7 bn in 2020 and are expected to reach 2,582.8 bn by 2025

Payments fraud:

  • Globally, card related fraud remains highest in terms of reported incidents from consumers, but fraud incidents associated with real-time payments were on the rise from 2019 to 2020 as fraudsters tend to target new channels
  • Real-time payments scams that were on the rise include: confidence tricks (12.5% rising to 13.7%), Identity theft (6% rising to 11.6%) and digital wallet account hacks (4.4% rising to 6.2%)

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