India's card payments market to grow 28.6% to ₹27.9 lakh cr in 2023: GlobalData

Given the "remarkable progress" in the adoption of non-cash payments in India in recent years, the card payments market is estimated to grow by 28.6% to reach ₹27.9 lakh crore ($337.1 billion) in 2023.

The success of non-cash payments in India can be attributed to the government’s push for digital payments and improvement in payments infrastructure, says the latest report by London-based data and analytics company GlobalData.

GlobalData’s ‘Payment Card Analytics’ shows card payments value in India registered a growth of 26.2% in 2022, driven by economic growth, consumers’ increasing preference for electronic payments, and constant efforts by financial authorities to boost cashless payments. The strong growth momentum observed in card payment value is expected to continue in 2023.

Kartik Challa, senior banking and payments analyst at GlobalData, points out that though India has traditionally been a cash-driven economy, the usage of cash for payments is on the decline.

"Government measures such as reducing merchant service fees and providing subsidies to merchants for installing point of sale (PoS) terminals are some of the key factors behind card payment market growth in the country,” says Challa.

Another noteworthy trend that has emerged in the country is while there has been a robust rise in card usage for PoS payments, including both at physical PoS terminals and online, its usage for cash withdrawals at ATMs is gradually slowing down.

In 2023, ATM cash withdrawals are estimated to increase by just 4.6% to reach ₹34.4 lakh crore ($416.2 billion). The Covid pandemic also played a part in highlighting the importance of "non-contact payment tools", which in turn benefitted card payments.

Other initiatives taken by the Centre include the abolishment of merchant service fees on transactions with state-owned RuPay cards and a levy on charges up to ₹21 ($0.25) per transaction beyond the monthly free transaction limit. They encouraged card usage and discouraged cash usage.

The country has also seen the gradual adoption and usage of "contactless payments". Although contactless card payments are not very popular in India, they are slowly gaining traction, with a rise in demand for ‘touch-free’ payments since the outbreak of the pandemic. To push contactless payments, the contactless payment limit was raised from ₹2,000 to ₹5,000 in January 2021.

According to a whitepaper released by Visa and Worldline in June 2022, the share of contactless card payments in total face-to-face card transactions in India grew by more than 6x -- from less than 2.5% in December 2018 to 16% in December 2021.

According to the RBI's Digital Payments Index, which captures the extent of digitisation of payments across the country, digital payments across the country grew 13.24% on a year-on-year basis as of March 2023. The index for March 2023 stands at 395.57 vs 377.46 for September 2022, shows the RBI data. The DPI index has "increased across all parameters", driven by significant growth in payment infrastructure and payment performance across the country over the period.