Swipe right: India’s love affair with digital payments

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Nearly 90 per cent of Indian consumers with internet access prefer digital payment options for online purchases, according to a report by Amazon Pay India and Kearney India. And this is true of small-town India as well.

About 65 per cent of transactions by consumers in small-town India are now digital, while in larger cities this ratio was around 75 per cent, the report titled ‘How Urban India Pays’ noted.

The survey spanned 120 cities, 6,000 consumers and over 1,000 merchants across India, and was conducted in the first quarter of 2024, at a time when regulatory action against some fintechs was at its peak.

Nearly 5 per cent of the respondents preferred digital payments even for offline transactions. More than 85 per cent indicated a strong preference for digital payments for discretionary spending, such as for electronics, clothes and footwear.

Affluent consumers lead the way with the highest degrees of digital payment usage [DDPU], tending to use various modes of digital payment for 80 per cent of their transactions. Meanwhile, consumers in the aspiring segment use digital payments for 67 per cent of transactions.

Age, gender no bar

Millennials and Gen X lead digital payments adoption, but the boomers are embracing digital wallets and cards at higher rates. Men and women both use digital payments in about 72 per cent of their transactions, indicating gender parity.

While UPI reigns supreme with 53 per cent of consumers preferring it for online purchases, digital wallets and cards (credit, debit, and prepaid) are preferred by 30 per cent of consumers. Cash is still predominant in offline purchases, with 25 per cent of consumers preferring UPI and 20 per cent preferring digital wallets and cards. Co-branded credit cards, like the Amazon Pay ICICI credit card, are gaining momentum; 46 per cent of survey respondents reported owning at least one co-branded card, driven by their attractive rewards structure.

Emerging modes like BNPL gain visibility as convenience, rewards propel India’s digital payment transformation, with 87 per cent awareness of the credit-based offering among respondents

Ahmedabad, Pune, Indore, Jaipur, Lucknow, Patna, Bhopal and Bhubaneswar — despite their relatively lower retail potential compared to the top metros — demonstrate a digital payment adoption comparable to that of larger metros.

Merchants drive change

The study points out that 46 per cent of transactions for street vendors (paan shops, fruit and flower sellers, food stalls and kirana stores) are now digital. Digital modes of payment constitute around 69 per cent of the total transaction volumes for the Indian merchants surveyed.

Across merchant types, the top reasons for preferring digital payments are convenience, trust, safety, and the ability to track transactions. About 63 per cent of the merchants admitted to accepting digital payments for transactions under ₹1,000 to prevent customers from going to competitors that accept digital payments.