Non-cash payment modes to account for 65% of all transactions by 2026: Report

The mentioned figure is higher than the current estimation of 40%

June 3, 2022

The digital payments industry will create opportunities for around US$ 10 trillion by 2026

UPI’s adoption will surge to 75% of the population in the next five years

The next wave of growth is likely to come from Tier 3-6 locations

Merchant payments would expand seven-fold to US$ 2.5-2.7 trillion by FY26

Non-cash payment modes such as United Payments Interface (UPI) will account for 65% of all the transactions by 2026, according to a report by consultancy firm BCG, and UPI services provider PhonePe. 

Now and later

As per the report, non cash payments are set to grow to 65% from the current 40%. It also said that the digital payments industry will create opportunities for around US$ 10 trillion by 2026 against the current US$ 3 trillion.

According to the report UPI’s adoption will surge to 75% of the population in the next five years, from the 35% recorded at the end of FY21. Merchant payments would expand seven-fold to US$ 2.5-2.7 trillion by 2026, up from the present US$ 0.3-0.4 trillion, it added.

The next wave of growth is likely to come from Tier 3-6 locations, as they have contributed nearly 60-70% of new mobile payment customers, said the report.

Merchant Discount Rate

The report also called for a “sustained Merchant Discount Rate (MDR)” to incentivize players of the financial ecosystem, and urge them to boost merchant acquisition, thereby expanding the use of digital payments across industries. 

Introducing an MDR of 0.2-0.3% of the transaction value for small tickets can allow banks, payment players, and the overall cash-less ecosystem to run sustainable businesses, concluded the report.

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