Card payments

India has made remarkable progress in the adoption of non-cash payments in recent years, supported by government's push for digital payments and improvement in payments infrastructure. The card payments market in India is estimated to grow by 28.6% in 2023 to reach Rs 27.9 trillion ($337.1 billion), as per the report from GlobalData.

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 terminals are some of the key factors behind card payment market growth in the country.

The government has been promoting digital payments through initiatives such as the Unified Payments Interface (UPI) and BharatQR. With this the card payments value in India registered a robust 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 payments value is expected to continue in 2023.

Other factors including rising disposable income of the middle class is leading to an increase in the demand for credit and debit cards and E-commerce sales in India are expected to reach Rs 1.3 trillion ($160 billion) in 2023, and card payments are the preferred mode of payment for online purchases.

While there has been a robust rise in card usage for Point-Of-Sale payments, including both at physical Point-Of-Sale 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 Rs 34.4 trillion ($416.2 billion). The pandemic also highlighted the importance of non-contact payment tools, thereby benefiting card payments.

There is a strong drive on the card payments and reduce dependence on cash, the government 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 allowed banks to levy cash withdrawal charges up to Rs 21 ($0.25) per transaction beyond the monthly free transaction limit, from January 2022, thereby discouraging cash usage.

The reality is consumers in India 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.

S Mohini Ratna, Editor, VARINDIA