Digital transaction to be as big as cash transaction by 2020: Google and BCG Report

Eighty per cent of these predicted digital transactions will be worth less than Rs 500 each, says the report.

Recently Google India and Boston Consulting Group (BCG) launched a report titled Digital Payments 2020. The report is based on a qualitative and quantitative research executed by Nielsen. Insights from this research were then combined with BCG's proprietary sizing model as well as Google and BCG's industry intelligence.

The report projects that by 2020, the size of digital payments industry in India will be $500 billion. Further, by 2020, non-cash contribution in the consumer payments segment will double to 40 per cent.

Non-cash transactions include cheques, demand drafts, net-banking, credit/debit cards, mobile wallets and unified payment interface (UPI). Already 81 per cent of the existing digital payment users prefer it to any other non-cash payment methods. Online shopping, payment of utility bills and buying movie tickets have emerged as the three top things that a user primarily interacts with.

Further, the report reveals that Indian consumers, are 90 per cent as likely, to use digital payments for both online as well as offline transactions. Over 60 per cent of digital payments value will be contributed by offline points of sale such as unorganised retail, eateries and transport.

Sharing his views at the event, Rajan Anandan, vice president, South East Asia and India, Google, says, "A lot of digital payments would be for offline transactions. It is going to be small value transactions. India in the next five years will have the smartest digital payment ecosystem. It will move from traditional payments to digital payments."

Giving his views, Alpesh Shah, senior partner and managing director, The Boston Consulting Group, India, says, "In 10 years, digital transactions will be as big as cash transactions. A lot of merchants have problems of not having change and that's where digital payments helps. By 2020, more than 10 million merchants would be connected with digital payment platforms."

Based on the research conducted, convenience has emerged as the most important factor that is driving this growth. This is followed by availability of offers while opting for digital payment methods.

The report also highlights that micro-transactions will form a substantial portion of the industry, with over 50 per cent of person-to-merchant transactions expected to be under Rs 100 and 80 per cent transactions would be under Rs 500. The report predicts that the value of remittances and money transfer that will pass through alternate digital payment instruments will double to 30 per cent by 2020.

The report identifies the various challenges that the digital payments ecosystem will need to overcome for the industry to grow to its potential. The research has shown that 1 of 2 non-users haven't used digital payments because they found the product too complicated to understand and 61 per cent of non-user merchants find it complex to use. Additionally, universality of acceptance of digital payment methods and merchant concerns around speed of transactions during peak hours have emerged as other inhibitors to usage.

For the purpose of the study, Nielsen conducted 14 group discussions, and 26 in-depth interviews for users and merchants in three cities (Mumbai, Lucknow and Delhi), and inputs from these were then used to form a comprehensive consumer and merchant quantitative survey. The consumer survey covered over 3,500 respondents (digital consumers - 1516, remittance users - 917 and merchants - 917), across nine geographies - Delhi, Mumbai, Bengaluru, Ludhiana, Lucknow, Indore, Surat, Visakhapatnam and Coimbatore.