Card payments in India to hit Rs 27.9 trillion mark in 2023: GlobalData

Card payments in India are likely to hit the Rs 27.9 trillion mark in 2023, up 28.6 per cent year-on-year (YoY), suggests a recent report by GlobalData, a London-based leading data and analytics company.

Card payments' value in India, GlobalData said, registered a robust growth of 26.2 per cent in 2022, driven by economic growth, consumers’ increasing preference for electronic payments, and efforts by financial authorities to boost cashless payments. This, GlobalData said, is likely to continue in 2023 and beyond as well.

“India has traditionally been a cash-driven economy. However, 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,” said Kartik Challa, senior banking and payments analyst at GlobalData.

That said, while there has been a robust rise in card usage for point of sales (POS) payments over the years, including both at physical POS terminals and online, Indians cash withdrawals at ATMs is gradually slowing down. Contactless payments, on the other hand, are gaining traction with a rise in demand for ‘touch-free’ payments since the outbreak of the Covid pandemic. To push contactless payments, the contactless payment limit was raised from Rs 2,000 to Rs 5,000 in January 2021.

"In 2023, ATM cash withdrawals are estimated to increase by just 4.6 per cent to reach Rs 34.4 trillion ($416.2 billion). The pandemic also highlighted the importance of non-contact payment tools, thereby benefiting card payments," Challa added.

Meanwhile, to drive card payments and reduce dependence on cash, the government had abolished merchant service fees on transactions with state-owned RuPay cards from January 2020, encouraging merchants to accept payments with RuPay cards. Further, the Reserve Bank of India (RBI) allowed banks to levy cash withdrawal charges up to Rs 21 per transaction beyond the monthly free transaction limit, from January 2022, thereby discouraging cash usage.

“Indian consumers are increasingly embracing electronic payments, gradually moving away from cash. While mobile wallets have been the major beneficiary of this trend, card payments are also on the rise, with growing consumer awareness about card benefits and rising merchant acceptance. Card payments are expected to grow at a strong compound annual growth rate (CAGR) of 21.2 per cent over 2023–27, compared to a much slower CAGR of 7 per cent forecast for ATM cash withdrawals during the same period,” the report suggests.

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 per cent in December 2018 to 16 per cent in December 2021. Quick Service Restaurants (QSRs), pharmacies, food, groceries, and supermarkets are some of the merchants, which registered increased contactless payments.