Covid restrictions have given a fillip to digital payments throughout around the world, and economies such as China, the US, Indonesia, and India are at the forefront of the innovations taking place. In many geographies, new methods and established systems are functioning side by side, according to The Global Payments Report 2022 by financial products and services company FIS.
Once considered only for consumer and retail use, real-time payments are increasingly targeting business and corporate applications. Private firms have adopted them for salary payment, accounts payable, mandates for direct debits, and bulk payments. Many government departments are also using real-time payments for fee and tax collection and benefit and pension payouts.
Many markets are replacing or renovating their established real-time services, especially those that repurposed their corporate real-time gross settlement (RTGS) services to cater for instant payments, such as Brazil, the UK, Japan, South Africa, and Mexico. Similarly, India and the US are introducing additional competing services that will sit alongside the established schemes. India is also among countries where domestic schemes are being used to enable cross-border, real-time international transactions and remittance payments. Nepal and Bhutan have adopted payment services based on the Unified Payments Interface (UPI). India has also enabled cross-border real-time payments for the domestic leg of inbound international payments. As schemes around the world move closer to standardisation and interoperability to promote commerce, cross-border real-time payments could become as routine as domestic payments.
India and China lead the world with the volume of daily transactions, averaging 70 and 43 million real-time daily payments, respectively.
A frontrunner in real-time payments services is e-commerce. Digital wallets represented 68.5 per cent of regional e-commerce transaction value in 2021, and is projected to expand to over 72 per cent of transaction value in 2025. In India, digital wallets form 45.4 per cent of e-commerce payments. Credit cards continue to form a large part of the transactions in mature economies such as Japan (58.3 per cent in 2021) and South Korea (56 per cent) but lags in emerging economies. In India, credit cards are just 13.3 per cent of the e-commerce payments.
While cards and digital wallets dominate e-commerce payments, there is a competitive mix of traditional and alternative payment methods. India’s e-commerce market continues to see double-digit growth rates and is expected to nearly double by 2025. While cash was the most favoured method of payment for e-commerce transactions (37 per cent), digital wallets are expected to retain their majority share (25 per cent as of now) through 2025. Though declining, bank transfers, cash-on-delivery and credit cards still retain meaningful shares. Credit and debit cards’ shares are at 18 per cent each. Retailer or bank financing has a minuscule share of 1 per cent as do Buy Now Pay Later schemes, the report finds.
While the long-term trend of digital payments replacing cash continues, cash remains a vital component of point-of-sale (POS) payments and is projected to retain leading share in India until 2023 when it is surpassed by mobile wallets.
