Indian households to make over 50% non-cash transactions by FY26: Report

Indian households make 35 per cent of their financial transactions digitally and usage is expected to cross 50 per cent by Financial Year 2025-26 (FY26), said a report on Tuesday.

Pay-to-merchant payments (P2M) account for a significant proportion of digital transactions. Households use digital payment methods for 80 per cent of grocery, food delivery, and travel transactions.

First-time e-commerce users during the pandemic accelerated the adoption of digital payments, said the report by Redseer Strategy Consultants and Plural by Pine labs. The Indian e-commerce market is worth Rs 400,000 crore and it is expected to reach Rs 900,000 crore by FY26, with customers from Tier 2 and smaller cities driving most of this growth.

“Our research suggests that online shoppers in India are expected to grow by 50 per cent in the coming three years to reach over 30 crore by FY26, further paving the way for the reach of online payments in the country,” said Jasbir Juneja, partner at Redseer.

As many as 85 per cent of businesses in India will be digitally enabled by FY26, helped by the growth of smartphone use and the internet, and government policies, the report said.

India has the second-highest number of internet users (more than 70 crore) after China and it is poised to become a global leader in digital payments in the coming years.

“…India has quietly orchestrated a revolution in online payments. The future is increased tech-enabled digitization at the online and offline point of sale and at Pine Labs we are happy to be playing a part in it,” said B Amrish Rau, chief executive officer of Pine Labs.

As more customers have adopted digital payments, businesses have also responded by leveraging technologies to enable digital transactions. The report estimates that 75 per cent of the 7 crore businesses in India are digitally enabled and the number is expected to rise to 85 per cent by FY26.

Unified Payments Interface (UPI) captures the biggest share of the payments market, accounting for 84 per cent of the total digital payments volume as of FY23. Bharat Bill Payment System, which facilitates various bill payments, is set to witness a compound annual growth rate (CAGR) of approximately 30 per cent between FY23 and FY26, from 110 crore transactions to 240 crore.

The report said that emerging trends, such as e-Rupi/CBDC, voice payments, wearable payment devices, and biometric payments, could further foster greater collaboration between fintech companies, businesses and the government.