According to a report by PwC India, retail online transaction platform unified payments interface (UPI) will likely continue to dominate the digital payments space in the country even as newer methods such as ‘buy now pay later’ (BNPL) and digital currency are expected to define the future of payments. Further, UPI, BNPL, Central Bank Digital Currency (CBDC) and offline payments are expected to drive growth of digital payments in India in the next five years. The report further notes that UPI is expected to continue to be the major contributor in the digital payments space, followed by BNPL.

The report mentions that Indian digital payments market saw steady growth at a compound annual growth rate (CAGR) of 23 per cent (volume wise), and is expected to reach 217 billion transactions in FY’26 from 59 billion in FY’22. In 2020-21, UPI transactions reached a record 22 billion (2,200 crore), and it is expected to reach 169 billion (16,900 crore) by 2025-26, growing at a CAGR (compounded annual growth rate) of 122 per cent.

According to the report, partnerships with other countries in Asia to enable low-value transactions and cross-border remittances through UPI will contribute to this growth. BNPL, which is currently estimated at Rs 363 billion, is expected to reach Rs 3,191 billion by the end of 2025-26.

Presenting a snapshot of the trends that will contribute to growth of digital payments industry in India, the report said that existing products and emerging use cases such as UPI, Fastag, transit (NCMC) and cards will continue to make inroads and gain additional wallet share of the Indian customers. These methods will continue to drive the growth in adoption and transactions numbers, said the report.

PwC report further said that enabling recurring payments and initial public offering (IPO) subscriptions along with cross-border remittances will provide a boost to UPI. Meanwhile, parking and fuel payments are being explored as new use cases for Fastag.

Further, the report said that with the Reserve Bank of India (RBI) allowing to expand the scope of tokenisation to cover additional use cases like laptops, desktops, wearables, internet of things (IoT) devices along with card-on-file tokenisation (CoFT), with enhanced card-related security, will ensure that the overall customer check-out experience remains intact.

Outlining the opportunity, the PwC report notes that poor connectivity and lack of access to online payment methods have opened up an opportunity for offline payments. Efforts have been made by various players in the past to develop and deploy such solutions but with limited success. They will give the necessary directions to the participants in developing offline payments solutions. Further, it will encourage banking and non-banking companies to collaborate with the solution developers, as per the report.

Moreover in the corporate payments space, financial institutions and service providers are offering payment solutions which can fulfil all the requirements of organisations and increase their operational efficiencies. Integrating payments into enterprise resource planning software that helps to automate essential business functions, and utilising payments data to improve operational efficiency and optimise essential processes are some of the use cases.