Chennai: Non-cash payments are set to overtake cash payments by 2022 as digital transactions are growing exponentially.
From being a 92 per cent cash economy in 2005, the country has already lowered its dependency on cash to 78 per cent by 2018. By then non-cash payments that include digital transactions, card transactions and other paper transactions have grown to occupy 22 per cent share of the total payment industry.
By 2020 non-cash payments would grow to 40 per cent and by 2022, they might become equally strong as cash payments.
In the next five years, cash may shrink to 41 per cent while non-cash will grow to 59 per cent, as per an estimate by BCG Consulting.
The main growth driver would be the increased adoption of digital transactions, which will grow its share in the total payment space from 13 per cent in 2018 to 26 per cent in 2020 and keep on expanding to 37 per cent by 2025. Digital includes all electronically closed transactions, automated clearing house payments and mobile transactions.
Credit and debit cards also would continue to grow, though at a slower pace. Their share would move up from 7 per cent to 12 per cent in 2020 and 21 per cent by 2025.
According to BCG, convenience is driving digital transactions with 84 per cent users opting for convenience of usage, 58 per cent for avoiding change, 45 per cent for not storing and managing cash and 41 per cent for tracking transactions.
There is also a significant 48 per cent who transact digitally for offers.
Among digital payments, with 406 million monthly transactions UPI-based payment instruments have already surpassed other pre-paid instruments like non-UPI mobile wallets and smart cards with 358 million transactions as on September 2018. Open infrastructure, interoperability and ease of use are some of the key features of UPI. Â
âUPI has been a game changer as its interoperability helps to do any transaction without logging on to the bank portal. UPI has already taken over the pre-paid instruments. It can effectively bring all other payment instruments on one platform,â said Abhinav Bansal, principal, Boston Consulting Group.