Digital payments have become increasingly popular in India, with a significant 90% of consumers preferring them for online shopping and 50% using online payment methods for offline purchases. The Kearney report titled “How Urban India Pays” highlights that more than 85% of respondents prefer digital payments for discretionary spending, such as electronics, clothes, and footwear. Millennials and Gen X are leading the way in adopting digital payment instruments, with Boomers also showing significant usage, particularly with cards and digital wallets. The report also notes that both men and women utilize digital payments in about 72% of their transactions, showcasing gender parity in digital payment adoption.
Convenience and rewards are key factors influencing consumers’ choice of digital payments according to the report, with approximately 60% of respondents citing convenience as the primary reason for using digital payments. Rewards or incentives for digital payments also play a role, with 49% of consumers choosing digital payments for online purchases and 34% for offline transactions. The report also highlights the increasing popularity of co-branded credit cards in India, as well as emerging trends like buy now, pay later (BNPL), wearable payments, and voice-assisted payments, which have high awareness among respondents.
The report suggests that digital payments have penetrated small towns in India, with 65% of transactions in these areas being digital, compared to 75% in larger cities. Cities like Lucknow, Patna, Bhopal, Jaipur, Bhubaneswar, Indore, Ahmedabad, and Pune are also showing a high Degree of Digital Payment Usage (DDPU) comparable to metro cities, despite having lower retail potential. The wide adoption of digital payments is evident with even street vendors, including paan shops, fruit and flower sellers, food stalls, and Kirana stores, receiving an average of 46% of their payments digitally, as per the report.
However, the report also highlights the challenges faced by both consumers and merchants with digital payments. Financial fraud, connectivity issues, and building trust in digital transactions are some of the key challenges identified. Despite these challenges, the report emphasizes the growing acceptance and integration of digital payments within the Indian economy, with digital modes constituting approximately 69% of total transaction volumes for merchants. The report suggests that with the increasing adoption of digital payments across various sectors, India is witnessing a significant shift in consumer behavior towards digital transactions for both online and offline purchases.
