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Growth projections 3 years ahead
June 2023
The Future of
© 2023 Redseer Strategy Consultants Confidential and Proprietary Information
Online Payments

₹
Preface
The Indian online payments ecosystem has changed the
customer’s perception of making transactions. Customers
today prefer paying via UPI apps for most of their daily
activities. Our research suggests that online shoppers in
India are expected to grow by 50% in the coming three
years to reach 30 Cr by FY26, further paving the way for
the reach of online payments in the country. Fintech
companies understand this trend well and are expected to
evolve offering more innovative but convenient financial
services.
From UPI and digital wallets to BNPL, online payments have
come a long way. The digital payments market is expected
to grow to ~INR 4K Lakh Cr by FY 26 from the current ~INR
3.2K Lakh Cr economy. With the introduction of different
technologies like IoT, AI, ML, and blockchain, their
involvement in digital payment systems evolution cannot
be underestimated.
With a robust ecosystem emerging around online
payments, businesses need to integrate online payments
to offer a seamless customer experience. Businesses must
understand which payment trends have a high customer
adoption rate and how they will help their companies to
grow. This report helps businesses with the following:
The report may help businesses be aware of different
online payment modes available/to be available and build
their payments strategy accordingly. This, in turn, will help
the businesses to increase their customer retention
leading to improvement in business performance.
Relevant trends: Focus on trends emerging in the online
payment system.
Business impact: : Businesses will understand the
impact of trends discussed and actions to better
prepare for the future.
Jasbir Juneja
Partner
Redseer
Foreword
Dear readers,
It gives me great pleasure to present to you an industry
report on online payments in India, a first of its kind from
Plural by Pine Labs. At a time when the world is experiencing
a digital revolution, India has emerged as a leading player in
the online payments space.
Having been in the industry for decades, I have witnessed
first-hand the tremendous growth and innovation that has
taken place in online payments in recent years. From mobile
wallets to UPI and QR codes, India has become a forerunner
in payments.
This report provides a comprehensive analysis of the online
payments landscape in India, including trends, implications
for businesses and opportunities for growth. It covers
various aspects of the online payments ecosystem,
including UPI, BBPS, embedded finance, voice payments,
wearable devices and more.
Our aim in producing this report is to provide insights and
guidance to stakeholders in the industry. We hope that it
will serve as a valuable resource for anyone interested in
understanding the online payments market in India and its
potential for growth.
I would like to thank the team of experts who have
contributed to this report, as well as our clients and our
partner, Setu, who have supported us in our mission to
drive the growth and adoption of online payments. I hope
that this report will contribute to a deeper understanding
of the payments industry in India and inspire all of us to
continue to innovate and evolve in this exciting field.
Amrish Rau
CEO
Pine Labs
Emergingtrendsthatwillhelpbusinessesdrawnewcustomers
Conclusion
Glossary
AboutPlural
AboutRedseer
Authors
India is on a fast-track to becoming a digital economy
Drivers of digital payment system
e-Commerce boosting online payments
Increased acceptance amongst businesses
Digital payments and lending attract the largest share of funding
Innovation has disrupted the digital payments sector
Indianhouseholdsmake~35%transactionsdigitally;expectedtocross~50%byFY26
Online payment trends
UPIcapturesthebiggestshareofdigitalpaymentvolume
UPI is helping businesses scale
UPI-ledpaymentsarefuellingBBPSbysimplifyingrecurringpaymentsforbusinesses
BBPS increasing the scope of businesses
BBPS helps businesses reduce bounce rate and improve customer experience
Embeddedfinanceenablesbusinessestoboosttheirrevenuegrowthpotential
Embedded Credit (BNPL)
Embedded Insurance
Embedded finance will help scale businesses by generating new revenue streams
RuPaytoincreasebusinesses'reachwithalarge-scalefinancialinclusionapproach
RuPay helps businesses grow
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Table of Contents
India’s digital transactions surpass INR 3.2K Lakh Cr so far in FY 23
Internet Usage Funnel (# of users in Cr)
Drivers of digital payments system
Drivers of digital payments system
Did you know that India has the second-highest number of internet users in the world, trailing only behind
China? With over 70 Cr internet users and a population of ~140 Cr, India is poised to become a global
leader in digital payments. From the bustling streets of Mumbai to the remote villages of Sabarkantha
district, the rise of digital payments is transforming the way we transact. But it’s not just about
convenience and speed. Innovative technologies like UPI, e-Rupi, and biometric authentication are
making payments more secure and accessible than ever before.
Increased internet and smartphone penetration and government policies have been the key drivers in the
adoption of digital payments in India. The rise in first-time e-Commerce users further accelerated the
adoption of digital payments during the COVID years.
Source(s): RedSeer Analysis
How to read: 45-50 is ~ 70% of 70-75, 40-45 is ~ 55% of 75, etc.
Access to Internet
Total population with
access to internet
Online Transactions
Transactions for services e.g.
banking/recharge, but not
products
Unique Mobile
payment user
Uses UPI or wallet as a digital
payment mode
FY23 FY26F
CAGR (23-26)
60-65 80-85
CAGR ~10%
# Smart phone users (Cr)
Active Internet users
Uses social media,Google,
but doesn’t transact online
~8%
~20%
~22%
~16%
95-100 100%
70-75 ~74%
65-70 ~69%
~90 90%
70-75 100%
40-45 ~55%
35-38 ~48%
45-50 ~70%
India is on a fast-track to
becoming a digital economy
Digital payments refer to both online and offline transactions. 5
Increased acceptance amongst businesses
As the adoption of digital payments among customers increase, businesses are leveraging technologies
to enable digital transactions. ~75% of the ~7 Cr businesses in India are digitally enabled, and this number
is expected to rise to ~85% by FY26.
Indian digital payment business funnel
(# of merchants in Cr)
e-Commerce boosting online payments
Digitally enabled
merchants
No. of merchants ~7
~5.5
Includes traders, other
services, kirana and
shopkeepers
Merchants with internet
connectivity
8.0-8.5
~7
FY23 FY26F
CAGR (23-26)
~9%
~5%
e-Commerce market (In INR 000 Cr)
Source(s): Redseer Analysis
Source(s): Redseer Analysis
~280
~370
FY21 FY22 FY23 FY26F
~900
CAGR
~400
~30%
Online shoppers in India over time (In Cr)
10%
16%
FY21 FY22 FY23 FY26F
14-16 15-18 20-23 30
CAGR
FY23-26
Metro
Tier I
Tier I
33%
Tier II+
73%
11%
16%
61%
14%
25%
57%
15%
28%
53%
16%
31%
Metro
Tier II+
India’s e-Commerce market, which currently
stands at ~INR 400K Cr, is expected to touch
~INR 900K Cr by FY26. Customers from Tier II
and smaller cities are likely to drive this growth;
and therefore, will account for 75% of all
e-Commerce transactions. Consequently, online
payments will become more widespread in India.
Digital payments refer to both online and offline transactions. 6
Digital payments and lending
attract the largest share of
funding
Innovation has disrupted the
digital payments sector
Source(s): NPCI, RBI, Redseer analysis
(Digital payments here include all categories classified by RBI including BHIM-UPI, NACH, IMPS, AePS, NETC, Cards, RTGS, NEFT, PPI and others)
Indian digital transactional volume (In 000 Cr)
18-20
Indian digital transactional value (In INR Lakh Cr)
~8.8
~10
FY23 E FY26 F
Represents data
till 31st
Dec 2022
FY22
India’s digital transactions surpass
INR 3.2KLakh Cr so far in FY23
~3k
~4K
~3.2K
FY23 E
FY22 FY26 F
Digital India Programme launched by the
Indian government in 2015 furthered the growth
of the digital payments industry by promoting a
faceless, paperless, cashless environment in
India.
QR codes have accelerated the adoption of P2M
payments in India, particularly in the retail
sector. This has emerged as a crucial aspect of
the digital payment landscape in the country.
The fintech sector has spurred the interest of
the investor community. The funding peaked at
an all-time high of ~INR 95K Cr in FY 22 – almost
five times higher than in FY 21. Although the total
funding reduced to ~INR 37K Cr in FY 23 due to
the funding winter, digital payments and lending
continues to bag the largest share of funding
(65% and 75% share of funding during FY 22 and
23 respectively).
Artificial Intelligence (AI), Machine Learning
(ML) and Internet of things (IoT) are leading the
way for innovation to make online payments
seamless. Innovations such as India Stack and
CBDC have also emerged to leverage financial
inclusion and enable smooth digital
transactions.
Head of Online Business,
Plural by Pine Labs
Tanya Naik,
UPI is a testament to India’s potential and the opportunities that lie ahead.
Businesses need to stay ahead of the curve in their online payments game.
One missed opportunity to innovate will leave you ten steps behind.
Digital payments refer to both online and offline transactions. 7
Indian households make ~35% transactions
digitally; expected to cross ~50% by FY26
Cash
Transaction
Non
Cash
Transaction
135-145 240-250
FY22
UPI
Cash
Debit Card
BNPL
Credit card
Net Banking
FY26F
48%
28%
8%
8%
4%
4%
In India, more than 40 Cr people transact
digitally, with P2M payments accounting for a
significant proportion. Customers use digital
payment methods in 80% of transactions in the
grocery, food delivery, and travel industries.
The convenience of mobile phones to make
payments has contributed to the growth of
P2M payments.
Indian Household Consumption –
By Payment Type
In INR Lakh Cr
Non-Cash Transactions in India –By volume
%, FY18-26F
Source(s): Redseer Analysis
Non-cash transactions do not include cash transactions at branches.
Internet transactions include RTGS, AePS, ABPS, NETC, and IMPS financial transactions.
Over the past ten years, the Indian fintech industry has undergone significant transformation,
introducing innovative solutions like UPI, BBPS, and BNPL that have been well-received by customers.
There is growing anticipation that emerging technologies such as e-Rupi and payments-enabled
wearable devices will gain popularity soon.
Trends witnessed in Indian online payment ecosystem
Digital payments refer to both online and offline transactions. 8
FY18 FY19 FY20 FY21 FY22 FY23 FY26F
8%
32%
10%
44%
6%
23%
20%
14%
27%
16%
37%
16%
13%
21%
13%
51%
11%
11%
13%
13%
63%
9%
9%
5%
14%
65%
9%
9%
5%
11%
73%
8%
8%
5%
6%
Advent of Covid- 19
UPI
PPI
Internet
Banking
POS
Others
2%
6%
6%
6%
14%
66%
Payment Banks
2010
Rupay
2012
AePS
2011
BBPS
2013
Bharat QR
2016
Wearable
payments
2020
UPI
2016
e-Rupi
2022
Note(s): The above-mentioned list is non-exhaustive
Online payment trends
In 2016, NPCI introduced UPI, an interface that allows users to connect multiple bank accounts to a single
mobile application and instantly transfer funds. This system ensures safe and convenient money
transfers between bank accounts and operates under the strict supervision of the RBI and NPCI.
Source(s): NPCI, RBI, Redseer Analysis
% of UPI transactions of total digital
payment volume (In 000 Cr)
FY21
UPI
FY22 FY23 FY26F
~1 15-20
~6 ~9
60%
48%
16%
10%
~90%
84%
52%
40%
UPI transactional volume(In 000 Cr)
CAGR
~2
~5
FY21 FY22 FY23 FY26F
~18
~8
30-35%
Source(s): NPCI, Redseer Analysis
Source(s): NPCI
Note(s): This list is not exhaustive
Source(s): Redseer Analysis
The mobility sector refers to cab and taxi aggregators.
% of transactional value by payment modes
across sectors (FY23)
e-Health 45%
COD
Online retail
Food delivery
Mobility
UPI Other modes of digital payments
65%
60%
60%
13%
25%
15%
30%
22%
15%
25%
25%
Other mode
of digital
payments
UPI has gained widespread acceptance among the masses as the most popular digital payment
method. PhonePe, Google Pay, Paytm, and Cred account for over 95% of the market share. Among the
various sectors, online retail leads the way, followed by food delivery and mobility (represents cab and
bike aggregators).
Type of transactions
Digital goods: games
Groceries  supermarkets
Eating places  restaurants
High transacting
categories
Online marketplaces
Utilities, electric gas, water 
sanitary
Medium transacting
categories
Tolls  bridge fees
Electronic shops
Taxi cabs  limousines
5816
5411
5812
5262
4900
4784
5732
4121
All other
categories
MCC Categories
Digital payments refer to both online and offline transactions. 9
UPI captures the biggest share of digital payment volume
R
22%
25%
25%
15%
Low MDR: More than 50% of UPI transactions are P2M, which allows businesses to increase their
profit margins compared to card transactions that charge 1.5-2% as transaction fees. P2M
transactions have shown high growth and low MDR, making them an attractive business option.
Ease in overseas expansion: In October 2022, NIPL partnered with Bhutan, Singapore, Malaysia,
and other countries. This collaboration aims to assist businesses in expanding their consumer
reach and increasing their revenue streams from international markets.
Ease in credit card transactions: Linking credit cards with UPI can boost sales as customers can
easily purchase products and services on credit without the inconvenience of carrying physical
cards.
Wider customer reach: Integrating UPI with feature phones can assist businesses in reaching
customers across various city tiers.
Seamless payment experience with UPI Lite: Eliminating the need for customers to enter their PIN
for every UPI payment can increase the frequency of small-ticket transactions (up to INR 200)
thereby leading to increase in revenue generation through UPI.
UPI has made life easier as payments can be done with ease and quickly. Linking
credit cards with UPI will further enhance the payments experience by allowing
customers to complete their purchase and pay over time.
Ankit Jain
PharmEasy Marketplace
10
UPI is helping businesses scale
UPI-led payments are fuelling BBPS by
simplifying recurring payments for businesses
UPI-led payments are fuelling BBPS by
simplifying recurring payments for businesses
UPI-led payments are fuelling BBPS by
simplifying recurring payments for businesses
UPI-led payments are fuelling BBPS by
simplifying recurring payments for businesses
BBPS transactional volume (In Cr) % share of BBPS transactional
volume (FY23)
The Bharat Bill Payment System (BBPS) is a
comprehensive ecosystem that facilitates
various bill payments by linking utility providers
and payment services.
The Government of India’s (GOI) initiative to
expand the BBPS framework to include billers of
all categories of recurring and non-recurring
payments is expected to boost this growth.
This move will likely make bill payments more
convenient for customers and streamline the
payment process for service providers, thereby
driving the growth of BBPS.
Redseer estimates suggest that BBPS is likely to
witness a CAGR of ~30% between 2023-2026.
Currently, PhonePe and Paytm hold the top
position for processing bill payments through
BBPS.
CAGR
~30
~70
FY21 FY22 FY23 FY26F
~240
~110
~30%
Source(s): NPCI, Redseer Analysis
Source(s): NPCI
Others include HDFC bank Ltd., Spice Money Ltd, India Ideas com
Ltd., Airtel Payments bank Ltd., etc
~110 Cr
36%
Others
50%
14%
Source(s): NPCI
11
FastTag
recharge
Municipal
taxes 
services
Cable
Gas
cylinder Water
Recharge
Finance  Tax
Utility Bills
Others
Credit
card
Mutual
Fund
Subscription
fee-digital  offline
DTH
Telecom Electricity
Insurance
Loan
repayment
Housing
society
Gaspiped
line
Education fees
BBPS has 20K + billers spread across the following categories:
BBPS increasing the scope of businesses
12
BBPS helps businesses reduce bounce rate
and improve customer experience
BBPS helps businesses reduce bounce rate
and improve customer experience
Increase customer retention rate: BBPS will help businesses to enable autopay features for their
customers thereby reducing churn rates due to payment failures.
Improved customer experience: Businesses that follow a non-recurring payment model can
benefit from listing their services on BBPS. This integration enables customers to pay for these
services and their regular bills, making it more convenient and hassle-free.
13
Embedded finance enables businesses to
boost their revenue growth potential
Embedded finance enables businesses to
boost their revenue growth potential
Embedded finance enables businesses to
boost their revenue growth potential
Embedded finance enables businesses to
boost their revenue growth potential
Embedded Credit (BNPL)
Embedded Credit (BNPL) Embedded Insurance
Embedded Insurance
Embedded finance refers to integrating financial products and services such as credit, insurance,
payments, and lending into the purchase journey on non-financial platforms.
Embedded Insurance refers to the sale of
insurance coverage or protection while a
customer is purchasing products or services.
Symbo, Zopper, Toffee, Cover Genius, Digit,
and Bajaj Finserv, are among the major players
operating in the market. This market is growing
due to a redefined perception of risk and
increased product innovation.
BNPL is a short-term financing option that
enables customers to make purchases and pay
for them over a period of time. High adoption
among Gen Z and Millennials has played a
significant role in the growth of BNPL.
However, with the RBI closely monitoring BNPL
players, the growth potential may be limited.
To address concerns regarding the regulatory
scrutiny, BNPL players have improved their
offerings to customers. They now allow
real-time loans based on pre-approval
requests sent by customers. The approval is
based on the merchant’s credibility risk, fraud
checks, and the customer’s past payment and
repayment behaviour.
BNPL disbursals in India (In INR 000 Cr)
.
CAGR
~4
~28
FY18 FY21 FY22 FY26F
~50
Source(s): Redseer Analysis
Note(s): Growth for embedded insurance and credit is shown owing to its
high popularity among the consumers
Source(s): Redseer Analysis
Note(s): Growth for embedded insurance and credit is shown owing to its high
popularity among the consumers
Embedded insurance market (in INR Cr)
~650
~430
~1K
FY21 FY22 FY23 FY26F
6-7K
~95%
~70%
~80%
CAGR
14
Embedded finance will help scale businesses by
generating new revenue streams
Embedded finance will help scale businesses by
generating new revenue streams
Increase in business revenue: Businesses can leverage embedded finance to increase revenue by
offering financial services on their platforms, positively impacting customer retention and average
ticket size. According to experts, 87% of businesses believe embedded finance will significantly
impact their growth and revenue in the next three years. Additionally, 15% of enterprises believe
that embedded finance will drive revenue for their company.
Low cost of acquisition: Embedded finance helps businesses acquire customers through an
established channel leading to low customer acquisition cost.
Seamless customer journey: Embedded finance helps improve customer experience as customers
can avail different options (pay for a product, buy insurance, take credit, etc.) without leaving the
app/website while making purchase.
Provides a competitive edge: Offering financial products/services at the time of checkout can
make it more appealing for customers, providing a unique selling point compared to competitors.
How Indians access banking products first shifted from bank branches to banking
apps. Today, it’s the shift from banking apps to all other apps. In the future every
banking product from deposits to insurance will happen on third party applica-
tions as well as bank apps. Embedded finance infra companies will be the key
enablers of this trend, and new types of products will be born as a result.
Sahil Kini,
Co-Founder  CEO,
Setu
RuPay to increase businesses' reach with a
large-scale financial inclusion approach
RuPay to increase businesses' reach with a
large-scale financial inclusion approach
RuPay helps businesses grow
RuPay helps businesses grow
RuPay, derived from Rupee and Payment
, is
India’s global card payment network, which
works across ATMs, POS devices and
e-Commerce websites and supports domestic
and international transactions. At the beginning
of FY22-23, RuPay was accepted in over 200
countries at ~4.2 Cr PoS locations and ~0.2 Cr
ATMs.
The Pradhan Mantri Jan-Dhan Yojana (PMJDY),
launched in 2014, contributed to the significant
growth of RuPay cards by providing banking
services to the underprivileged. As of January
2022, there were ~65 Cr RuPay debit cards in
circulation, accounting for 65% of the total debit
cards issued, according to the RBI. By December
2022, ~30 Cr e-Commerce transactions were
made using RuPay.
RuPay e-Commerce merchant wise transactions – Mar’23
Source(s): NPCI, Redseer Analysis
Source(s): NPCI,
Note(s): The list is not exhaustive
(XXXX) Indicates merchant category codes(MCC)
High transactions Digital goods-
games (5816)
Insurance
sales
(6300)
Colleges,
universities
(8220)
Apparel 
accessories
store(5699)
Restaurants
(5812)
Tax payments
(9311)
Utilities
(4900)
Cab services
(4121)
Fast food
restaurants
(5814)
Cable, satellite
and other
television
services (4899)
Travel agencies
 tour operators
(4722)
Grocery store
 supermarkets
(5411)
Medium transactions
Reaching out to rural and untapped customers: Businesses can expand their product reach to the
untapped population who have now access to bank accounts through PMJDY.
Improvement in bottom-line performance: Zero MDR helps businesses save costs and improve
profitability compared to card transactions that charge 1.5-2% as transaction fees.
CAGR
~140
~150
FY21 FY22 FY23 FY26F
~180
~320
~80%
~20%
~20%
~70%
~56%
~51%
~44%
~49% ~30%
RuPay transactional volume (In Cr)
Low transactions
15
POS
e-Commerce
Emerging trends that will help
businesses draw new customers
Emerging trends that will help
businesses draw new customers
Technology and security advancements have
made online payments an easy and trustworthy
process for customers, resulting in a surge in
demand for convenient payment options.
This has fostered greater collaboration between
fintech companies, businesses, and the
government to provide the same. This synergy is
expected to drive more exciting innovations in
the payment space in India.
Emerging Trends Elaboration Use Cases/Target
audience
Future Growth Implication on
businesses
e-Rupi/CBDC
Prepaid e-vouchers
are shared with the
beneficiary via SMS
or QR codes and
redeemed without
cards or online
payment apps.
Currently used for
disbursal of
government benefits
(Covid vaccinations)
Retail e-Rupi
(launched in
December 2022) is
an electronic
currency used
primarily for retail
transactions.
Retail e-Rupi
witnessed ~800K
transactional volume
within two months
since its launch. We
predict that it will
continue to grow
owing to factors like
high digital penetration
for small-value
transactions and high
currency-to-GDP ratio.
Improved customer
experience and larger
customer base as the
transaction can
happen without a bank
account.
Voice payments
Enables online
transactions via
voice/call.
Urban: (Introducing
superior customer
experience)
Rural: Immense
potential among
feature phone users
Globally, by 2030,
~50% of the
transactions will
take place through
voice technologies.
Wide customer
reach across all
city tier levels.
Wearable
payment devices
A wearable device
directly linked to the
consumer’s bank
account and
functions as a debit
card.
Millennials and GenZ
Users can tap the
wearable device
during checkout
without using
physical cards.
The Indian wearable
market is valued at
INR 1.1 Lakh Cr in
FY22 and expected to
reach INR 1.4 Lakh Cr
by FY2030.
Enable omni-channel
user experience,
thereby increasing
the businesses'
revenue and
customer experience.
High customer
retention rate due
to the ease of
making payments.
Biometric
payments
Biometric payments
is a technology that
uses biometric
authentication
based on the user’s
physical
characteristics of
users, such as
fingerprints, facial
recognitions, and iris.
Individuals can save
their biometric
patterns on the
payment page which
can be used to make
payments without
the need for
physical cards or
user details.
Globally, biometric
payment is expected
to grow to ~INR 4.2
Lakh Cr by 2028 from
~INR 2.4 Lakh Cr in
2021.
China, Japan and India
are the leaders among
the Asia-pacific
countries
Facilitates seamless
customer
experience, as
payments are more
rapid and secured.
Decreases transaction
cost as only fewer
fraudulent
transactions needs to
be processed.
Source(s): Redseer IP
16
Conclusion
In summary, India has witnessed a huge shift in the payments landscape, owing to the emergence of
technologies like UPI, BBPS, embedded finance, voice payments, e-RUPI, and biometrics. This shift has
fuelled the growth of the digital payment ecosystem, which is currently valued at around ~INR 3.2K Lakh
Cr and expected to grow to ~INR 4K Lakh Cr by FY26.
In the next three years, we can expect to see a continued emphasis on the development of new payment
technologies. Businesses that can integrate these technologies into their payments strategies will be
best positioned to thrive as they can streamline their operations, reduce costs, and enhance customer
satisfaction. However, with the growth of digital payments comes the challenge of ensuring
cybersecurity, fraud mitigation, data security and system readiness and availability.
India is at the helm of digital transformation. We are in the cricket stadium, the
first ball is yet to be bowled, the crowd is cheering and that’s where we are at
when it comes to online payments. There is still massive potential waiting to be
unlocked.
CEO,
Pine Labs
Amrish Rau
17
Glossary
Category Keywords Definition/Terms/Acronyms
General
CAGR
GOI
Metro Cities
Tier I cities
Tier II cities
Tier III  smaller cities
IoT
AI
ML
Blockchain
GenZ
Millennials
PMJDY
Buisnesses
Financial
Cr
RBI
NPCI
NIPL
Digital payments
Online payments
Transactional Value
Transactional
Volume
P2M
MDR
India Stack
CBDC
UPI
BBPS
Recurring payment
Non-recurring
payments
Embedded Payments
Embedded
Investments
BNPL
ATM
POS
Reserve Bank of India
National Payment Corporation of India
NPCI International Payment Limited
Transfer of payments via offline or online channel
Transfer of payments using digital devices like mobile, computer, etc
On an average, customer spending on each purchase.
Total number of transactions processed through a platform
Peer to merchant
Merchant discount rate
Set of APIs which allows the government and private companies to allow
cashless transactions
Central bank digital currencies are digital form of country’s fiat currency
Unified payment interface
Bharat bill payment system
Model where money is automatically deducted from customer’s account
at scheduled intervals
Refers to payments that happen just once
It refers to the system where non-financial companies integrate
wallet-based payment option onto their apps/websites.
It refers to the system where non-financial companies integrate investing
options onto their apps/websites.
Buy now pay later
Automated teller machine
Point of sale refers to a place where customers make the payment for
goods and services.
Sectors
e-Commerce
Mobility
e-Health
Buying and selling of goods and services online
Booking of inter-city cabs/bikes via online platform
Purchase of health-care products/services online
18
Compounded annual growth rate
The year stated in the report is financial year
Government of India
Mumbai, Delhi, Bangalore, Chennai, Hyderabad, Kolkata, Pune and
Ahmedabad (8 cities)
Top 12 cities in India by population beyond metro cities
Beyond 100 cities by population
Internet of Things
Artificial Intelligence
Machine Learning
System in which record of transaction is maintained
across computers, linked in a peer-to-peer network
Pradhan Mantri Jan Dhan Yojna
Includes merchants, traders and service providers
Top 20-100 cities in India by population
Peoplebornbetween1981-1996
People born between 1997-2012
Crore (10⁷)
Year (FY)
K Thousand (10³)
Million (10⁶)
Billion (10⁹)
M
B
About Plural
*Plural by Pine Labs has received an in-principle authorisation from the Reserve Bank of India (RBI) to operate
as a Payment Aggregator.
Setu has received an in-principle authorisation from the Reserve Bank of India (RBI) to operate as an Account
Aggregator.
Plural by Pine Labs offers online payment solutions and more for businesses. Contact us to know more.
Plural* was launched by Pine Labs in October 2021
to provide online payments solutions to business-
es. Plural’s products include payment gateway,
affordability suite, payment links, card tokenisa-
tion, subscription solutions, banking, payouts and
more.
Pine Labs also acquired Setu in June 2022. Setu is
a fintech API Infrastructure startup—that builds
APIs for customer onboarding, BBPS payments,
and other embedded finance solutions. These
APIs are used by several top fintech and financial
institutions to build powerful and personalized
journeys for their users.
Presented below are Plural’s payment offerings:
Embedded
Finance - API Stack
• Enable Fixed Deposits
• BBPS Bill Pay
• Lending Enabler
Banking and Payouts
• Current Account
• Vendor Payouts
• Reconciliation
Customer onboarding
and verification
• KYC
• Account Aggregator*
• Reverse Penny
Drop -Industry First
Payment collection
• Payment Gateway
• Payment Links
• Affordability Suite -
EMIs, Cashbacks,
Offers and more
• BBPS Bill Collect
• Subscriptions with
UPI Autopay
19
750+Customers 9.9M+ transactions processed INR 250B worth of transactions processed
15+ banking partnerships 125 team strength
About Redseer
Redseer Strategy Consultants is a leading strategy consulting firm that has been at the forefront of shaping the
internet business landscape in India for the past 13 years. Our relentless focus on innovation, deep consumer
understanding, and a strong entrepreneurial mindset have established us as the go-to advisory firm for
new-age consumer-focused businesses.
With a rich portfolio of over 500 successful engagements, Redseer has become synonymous with growth advi-
sory, digital strategy, and investment thesis formulation. We have helped numerous organizations unlock their
full potential and achieve sustainable growth in the ever-evolving Internet economy.
Our expertise extends beyond providing strategic guidance. Redseer has emerged as the most widely quoted
consulting firm in the media, cementing our position as thought leaders in the industry. We are proud to have a
market share of over 90% in new-age IPOs, with notable engagements including Zomato, GoTo, Nykaa, Paytm,
Cartrade, and Delhivery. These successful IPOs are a testament to our deep understanding of the consumer
tech space and our ability to navigate the complexities of the market.
Redseer’s impact goes beyond IPOs. We enjoy more than 50% market share in new-age deal advisory and a lion’s
share in the strategy consulting space. Our proprietary methodologies, high-quality research, and a team of
dynamic consultants have disrupted the traditional management consulting industry, positioning us as the
most sought-after advisory firm for consumer-focused businesses.
Headquartered in Bengaluru, India, Redseer has a strong presence across the globe, with offices in the Middle
East, Southeast Asia, USA, and the UK. Our team of over 1000 consultants bring diverse expertise and a passion
for delivering results. We pride ourselves on being nimble, adaptable, and agile, ensuring that we are always
ahead of the curve in an ever-changing business landscape.
20
Authors
Milind Nigam
Business Analyst,
Redseer
Pooja Varma
Associate Consultant,
Redseer
57%
53%
Anuj Kumar
Director,
Redseer
Amrita Konaiagari
Sr. Manager,
Brand  Product Marketing
Plural by Pine Labs
Kanishka Mohan
Partner,
Redseer
Swapnika Pervela
Associate Director,
Brand  Product Marketing
Plural by Pine Labs
21
Disclaimer
Copyright © Redseer Management Consulting Private Limited (“Redseer”). All rights reserved.
While we have made every attempt to ensure that the information contained in this report has been
obtained from reliable sources, all data and information provided in this report is intended solely for informa-
tion purposes and general guidance on matters of interest for the personal use of the reader, who shall
accept full responsibility for its use. Redseer does and seeks to do business with companies covered in its
research reports. As a result, readers should be aware that Redseer may have a conflict of interest that
could affect the objectivity of the report. All information in this report is provided “as is”, with no guarantee
of completeness and/or accuracy of the results obtained from the use of this information, and without
warranty of any kind, express or implied, including, but not limited to warranties of performance, merchant-
ability and fitness for a particular purpose. All trademarks, logos and brand names are the property of their
respective owners and are used in this report for identification purposes only. Given the changing nature of
laws and the inherent hazards of electronic communication, there may be delays, omissions or inaccuracies
in the information contained in this report. Accordingly, the information in this report is provided with the
understanding that the authors herein are not engaged in rendering legal, accounting, tax, or other profes-
sional advice or services. As such, it should not be used as a substitute for consultation with professional
advisers. This report cannot be sold for consideration, within or outside India, without the express written
permission of Redseer. In no event shall Redseer or its partners, employees or agents, be liable to you or
anyone else for any decision made or action taken in reliance on the information in this report or for any
errors, omissions, or delays in the content of this report or any losses, injuries, or damages including any
incidental or any consequential, special or similar loss or damages, arising out of, or in connection with the
use of this report.
22

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The Future of Online Payments

  • 1. Growth projections 3 years ahead June 2023 The Future of © 2023 Redseer Strategy Consultants Confidential and Proprietary Information Online Payments ₹
  • 2. Preface The Indian online payments ecosystem has changed the customer’s perception of making transactions. Customers today prefer paying via UPI apps for most of their daily activities. Our research suggests that online shoppers in India are expected to grow by 50% in the coming three years to reach 30 Cr by FY26, further paving the way for the reach of online payments in the country. Fintech companies understand this trend well and are expected to evolve offering more innovative but convenient financial services. From UPI and digital wallets to BNPL, online payments have come a long way. The digital payments market is expected to grow to ~INR 4K Lakh Cr by FY 26 from the current ~INR 3.2K Lakh Cr economy. With the introduction of different technologies like IoT, AI, ML, and blockchain, their involvement in digital payment systems evolution cannot be underestimated. With a robust ecosystem emerging around online payments, businesses need to integrate online payments to offer a seamless customer experience. Businesses must understand which payment trends have a high customer adoption rate and how they will help their companies to grow. This report helps businesses with the following: The report may help businesses be aware of different online payment modes available/to be available and build their payments strategy accordingly. This, in turn, will help the businesses to increase their customer retention leading to improvement in business performance. Relevant trends: Focus on trends emerging in the online payment system. Business impact: : Businesses will understand the impact of trends discussed and actions to better prepare for the future. Jasbir Juneja Partner Redseer
  • 3. Foreword Dear readers, It gives me great pleasure to present to you an industry report on online payments in India, a first of its kind from Plural by Pine Labs. At a time when the world is experiencing a digital revolution, India has emerged as a leading player in the online payments space. Having been in the industry for decades, I have witnessed first-hand the tremendous growth and innovation that has taken place in online payments in recent years. From mobile wallets to UPI and QR codes, India has become a forerunner in payments. This report provides a comprehensive analysis of the online payments landscape in India, including trends, implications for businesses and opportunities for growth. It covers various aspects of the online payments ecosystem, including UPI, BBPS, embedded finance, voice payments, wearable devices and more. Our aim in producing this report is to provide insights and guidance to stakeholders in the industry. We hope that it will serve as a valuable resource for anyone interested in understanding the online payments market in India and its potential for growth. I would like to thank the team of experts who have contributed to this report, as well as our clients and our partner, Setu, who have supported us in our mission to drive the growth and adoption of online payments. I hope that this report will contribute to a deeper understanding of the payments industry in India and inspire all of us to continue to innovate and evolve in this exciting field. Amrish Rau CEO Pine Labs
  • 4. Emergingtrendsthatwillhelpbusinessesdrawnewcustomers Conclusion Glossary AboutPlural AboutRedseer Authors India is on a fast-track to becoming a digital economy Drivers of digital payment system e-Commerce boosting online payments Increased acceptance amongst businesses Digital payments and lending attract the largest share of funding Innovation has disrupted the digital payments sector Indianhouseholdsmake~35%transactionsdigitally;expectedtocross~50%byFY26 Online payment trends UPIcapturesthebiggestshareofdigitalpaymentvolume UPI is helping businesses scale UPI-ledpaymentsarefuellingBBPSbysimplifyingrecurringpaymentsforbusinesses BBPS increasing the scope of businesses BBPS helps businesses reduce bounce rate and improve customer experience Embeddedfinanceenablesbusinessestoboosttheirrevenuegrowthpotential Embedded Credit (BNPL) Embedded Insurance Embedded finance will help scale businesses by generating new revenue streams RuPaytoincreasebusinesses'reachwithalarge-scalefinancialinclusionapproach RuPay helps businesses grow 16 17 18 19 20 21 5 5 5 6 7 7 7 8 9 9 10 11 11 12 13 13 13 14 15 15 Table of Contents India’s digital transactions surpass INR 3.2K Lakh Cr so far in FY 23
  • 5. Internet Usage Funnel (# of users in Cr) Drivers of digital payments system Drivers of digital payments system Did you know that India has the second-highest number of internet users in the world, trailing only behind China? With over 70 Cr internet users and a population of ~140 Cr, India is poised to become a global leader in digital payments. From the bustling streets of Mumbai to the remote villages of Sabarkantha district, the rise of digital payments is transforming the way we transact. But it’s not just about convenience and speed. Innovative technologies like UPI, e-Rupi, and biometric authentication are making payments more secure and accessible than ever before. Increased internet and smartphone penetration and government policies have been the key drivers in the adoption of digital payments in India. The rise in first-time e-Commerce users further accelerated the adoption of digital payments during the COVID years. Source(s): RedSeer Analysis How to read: 45-50 is ~ 70% of 70-75, 40-45 is ~ 55% of 75, etc. Access to Internet Total population with access to internet Online Transactions Transactions for services e.g. banking/recharge, but not products Unique Mobile payment user Uses UPI or wallet as a digital payment mode FY23 FY26F CAGR (23-26) 60-65 80-85 CAGR ~10% # Smart phone users (Cr) Active Internet users Uses social media,Google, but doesn’t transact online ~8% ~20% ~22% ~16% 95-100 100% 70-75 ~74% 65-70 ~69% ~90 90% 70-75 100% 40-45 ~55% 35-38 ~48% 45-50 ~70% India is on a fast-track to becoming a digital economy Digital payments refer to both online and offline transactions. 5
  • 6. Increased acceptance amongst businesses As the adoption of digital payments among customers increase, businesses are leveraging technologies to enable digital transactions. ~75% of the ~7 Cr businesses in India are digitally enabled, and this number is expected to rise to ~85% by FY26. Indian digital payment business funnel (# of merchants in Cr) e-Commerce boosting online payments Digitally enabled merchants No. of merchants ~7 ~5.5 Includes traders, other services, kirana and shopkeepers Merchants with internet connectivity 8.0-8.5 ~7 FY23 FY26F CAGR (23-26) ~9% ~5% e-Commerce market (In INR 000 Cr) Source(s): Redseer Analysis Source(s): Redseer Analysis ~280 ~370 FY21 FY22 FY23 FY26F ~900 CAGR ~400 ~30% Online shoppers in India over time (In Cr) 10% 16% FY21 FY22 FY23 FY26F 14-16 15-18 20-23 30 CAGR FY23-26 Metro Tier I Tier I 33% Tier II+ 73% 11% 16% 61% 14% 25% 57% 15% 28% 53% 16% 31% Metro Tier II+ India’s e-Commerce market, which currently stands at ~INR 400K Cr, is expected to touch ~INR 900K Cr by FY26. Customers from Tier II and smaller cities are likely to drive this growth; and therefore, will account for 75% of all e-Commerce transactions. Consequently, online payments will become more widespread in India. Digital payments refer to both online and offline transactions. 6
  • 7. Digital payments and lending attract the largest share of funding Innovation has disrupted the digital payments sector Source(s): NPCI, RBI, Redseer analysis (Digital payments here include all categories classified by RBI including BHIM-UPI, NACH, IMPS, AePS, NETC, Cards, RTGS, NEFT, PPI and others) Indian digital transactional volume (In 000 Cr) 18-20 Indian digital transactional value (In INR Lakh Cr) ~8.8 ~10 FY23 E FY26 F Represents data till 31st Dec 2022 FY22 India’s digital transactions surpass INR 3.2KLakh Cr so far in FY23 ~3k ~4K ~3.2K FY23 E FY22 FY26 F Digital India Programme launched by the Indian government in 2015 furthered the growth of the digital payments industry by promoting a faceless, paperless, cashless environment in India. QR codes have accelerated the adoption of P2M payments in India, particularly in the retail sector. This has emerged as a crucial aspect of the digital payment landscape in the country. The fintech sector has spurred the interest of the investor community. The funding peaked at an all-time high of ~INR 95K Cr in FY 22 – almost five times higher than in FY 21. Although the total funding reduced to ~INR 37K Cr in FY 23 due to the funding winter, digital payments and lending continues to bag the largest share of funding (65% and 75% share of funding during FY 22 and 23 respectively). Artificial Intelligence (AI), Machine Learning (ML) and Internet of things (IoT) are leading the way for innovation to make online payments seamless. Innovations such as India Stack and CBDC have also emerged to leverage financial inclusion and enable smooth digital transactions. Head of Online Business, Plural by Pine Labs Tanya Naik, UPI is a testament to India’s potential and the opportunities that lie ahead. Businesses need to stay ahead of the curve in their online payments game. One missed opportunity to innovate will leave you ten steps behind. Digital payments refer to both online and offline transactions. 7
  • 8. Indian households make ~35% transactions digitally; expected to cross ~50% by FY26 Cash Transaction Non Cash Transaction 135-145 240-250 FY22 UPI Cash Debit Card BNPL Credit card Net Banking FY26F 48% 28% 8% 8% 4% 4% In India, more than 40 Cr people transact digitally, with P2M payments accounting for a significant proportion. Customers use digital payment methods in 80% of transactions in the grocery, food delivery, and travel industries. The convenience of mobile phones to make payments has contributed to the growth of P2M payments. Indian Household Consumption – By Payment Type In INR Lakh Cr Non-Cash Transactions in India –By volume %, FY18-26F Source(s): Redseer Analysis Non-cash transactions do not include cash transactions at branches. Internet transactions include RTGS, AePS, ABPS, NETC, and IMPS financial transactions. Over the past ten years, the Indian fintech industry has undergone significant transformation, introducing innovative solutions like UPI, BBPS, and BNPL that have been well-received by customers. There is growing anticipation that emerging technologies such as e-Rupi and payments-enabled wearable devices will gain popularity soon. Trends witnessed in Indian online payment ecosystem Digital payments refer to both online and offline transactions. 8 FY18 FY19 FY20 FY21 FY22 FY23 FY26F 8% 32% 10% 44% 6% 23% 20% 14% 27% 16% 37% 16% 13% 21% 13% 51% 11% 11% 13% 13% 63% 9% 9% 5% 14% 65% 9% 9% 5% 11% 73% 8% 8% 5% 6% Advent of Covid- 19 UPI PPI Internet Banking POS Others 2% 6% 6% 6% 14% 66% Payment Banks 2010 Rupay 2012 AePS 2011 BBPS 2013 Bharat QR 2016 Wearable payments 2020 UPI 2016 e-Rupi 2022 Note(s): The above-mentioned list is non-exhaustive
  • 9. Online payment trends In 2016, NPCI introduced UPI, an interface that allows users to connect multiple bank accounts to a single mobile application and instantly transfer funds. This system ensures safe and convenient money transfers between bank accounts and operates under the strict supervision of the RBI and NPCI. Source(s): NPCI, RBI, Redseer Analysis % of UPI transactions of total digital payment volume (In 000 Cr) FY21 UPI FY22 FY23 FY26F ~1 15-20 ~6 ~9 60% 48% 16% 10% ~90% 84% 52% 40% UPI transactional volume(In 000 Cr) CAGR ~2 ~5 FY21 FY22 FY23 FY26F ~18 ~8 30-35% Source(s): NPCI, Redseer Analysis Source(s): NPCI Note(s): This list is not exhaustive Source(s): Redseer Analysis The mobility sector refers to cab and taxi aggregators. % of transactional value by payment modes across sectors (FY23) e-Health 45% COD Online retail Food delivery Mobility UPI Other modes of digital payments 65% 60% 60% 13% 25% 15% 30% 22% 15% 25% 25% Other mode of digital payments UPI has gained widespread acceptance among the masses as the most popular digital payment method. PhonePe, Google Pay, Paytm, and Cred account for over 95% of the market share. Among the various sectors, online retail leads the way, followed by food delivery and mobility (represents cab and bike aggregators). Type of transactions Digital goods: games Groceries supermarkets Eating places restaurants High transacting categories Online marketplaces Utilities, electric gas, water sanitary Medium transacting categories Tolls bridge fees Electronic shops Taxi cabs limousines 5816 5411 5812 5262 4900 4784 5732 4121 All other categories MCC Categories Digital payments refer to both online and offline transactions. 9 UPI captures the biggest share of digital payment volume
  • 10. R 22% 25% 25% 15% Low MDR: More than 50% of UPI transactions are P2M, which allows businesses to increase their profit margins compared to card transactions that charge 1.5-2% as transaction fees. P2M transactions have shown high growth and low MDR, making them an attractive business option. Ease in overseas expansion: In October 2022, NIPL partnered with Bhutan, Singapore, Malaysia, and other countries. This collaboration aims to assist businesses in expanding their consumer reach and increasing their revenue streams from international markets. Ease in credit card transactions: Linking credit cards with UPI can boost sales as customers can easily purchase products and services on credit without the inconvenience of carrying physical cards. Wider customer reach: Integrating UPI with feature phones can assist businesses in reaching customers across various city tiers. Seamless payment experience with UPI Lite: Eliminating the need for customers to enter their PIN for every UPI payment can increase the frequency of small-ticket transactions (up to INR 200) thereby leading to increase in revenue generation through UPI. UPI has made life easier as payments can be done with ease and quickly. Linking credit cards with UPI will further enhance the payments experience by allowing customers to complete their purchase and pay over time. Ankit Jain PharmEasy Marketplace 10 UPI is helping businesses scale
  • 11. UPI-led payments are fuelling BBPS by simplifying recurring payments for businesses UPI-led payments are fuelling BBPS by simplifying recurring payments for businesses UPI-led payments are fuelling BBPS by simplifying recurring payments for businesses UPI-led payments are fuelling BBPS by simplifying recurring payments for businesses BBPS transactional volume (In Cr) % share of BBPS transactional volume (FY23) The Bharat Bill Payment System (BBPS) is a comprehensive ecosystem that facilitates various bill payments by linking utility providers and payment services. The Government of India’s (GOI) initiative to expand the BBPS framework to include billers of all categories of recurring and non-recurring payments is expected to boost this growth. This move will likely make bill payments more convenient for customers and streamline the payment process for service providers, thereby driving the growth of BBPS. Redseer estimates suggest that BBPS is likely to witness a CAGR of ~30% between 2023-2026. Currently, PhonePe and Paytm hold the top position for processing bill payments through BBPS. CAGR ~30 ~70 FY21 FY22 FY23 FY26F ~240 ~110 ~30% Source(s): NPCI, Redseer Analysis Source(s): NPCI Others include HDFC bank Ltd., Spice Money Ltd, India Ideas com Ltd., Airtel Payments bank Ltd., etc ~110 Cr 36% Others 50% 14% Source(s): NPCI 11 FastTag recharge Municipal taxes services Cable Gas cylinder Water Recharge Finance Tax Utility Bills Others Credit card Mutual Fund Subscription fee-digital offline DTH Telecom Electricity Insurance Loan repayment Housing society Gaspiped line Education fees BBPS has 20K + billers spread across the following categories: BBPS increasing the scope of businesses
  • 12. 12 BBPS helps businesses reduce bounce rate and improve customer experience BBPS helps businesses reduce bounce rate and improve customer experience Increase customer retention rate: BBPS will help businesses to enable autopay features for their customers thereby reducing churn rates due to payment failures. Improved customer experience: Businesses that follow a non-recurring payment model can benefit from listing their services on BBPS. This integration enables customers to pay for these services and their regular bills, making it more convenient and hassle-free.
  • 13. 13 Embedded finance enables businesses to boost their revenue growth potential Embedded finance enables businesses to boost their revenue growth potential Embedded finance enables businesses to boost their revenue growth potential Embedded finance enables businesses to boost their revenue growth potential Embedded Credit (BNPL) Embedded Credit (BNPL) Embedded Insurance Embedded Insurance Embedded finance refers to integrating financial products and services such as credit, insurance, payments, and lending into the purchase journey on non-financial platforms. Embedded Insurance refers to the sale of insurance coverage or protection while a customer is purchasing products or services. Symbo, Zopper, Toffee, Cover Genius, Digit, and Bajaj Finserv, are among the major players operating in the market. This market is growing due to a redefined perception of risk and increased product innovation. BNPL is a short-term financing option that enables customers to make purchases and pay for them over a period of time. High adoption among Gen Z and Millennials has played a significant role in the growth of BNPL. However, with the RBI closely monitoring BNPL players, the growth potential may be limited. To address concerns regarding the regulatory scrutiny, BNPL players have improved their offerings to customers. They now allow real-time loans based on pre-approval requests sent by customers. The approval is based on the merchant’s credibility risk, fraud checks, and the customer’s past payment and repayment behaviour. BNPL disbursals in India (In INR 000 Cr) . CAGR ~4 ~28 FY18 FY21 FY22 FY26F ~50 Source(s): Redseer Analysis Note(s): Growth for embedded insurance and credit is shown owing to its high popularity among the consumers Source(s): Redseer Analysis Note(s): Growth for embedded insurance and credit is shown owing to its high popularity among the consumers Embedded insurance market (in INR Cr) ~650 ~430 ~1K FY21 FY22 FY23 FY26F 6-7K ~95% ~70% ~80% CAGR
  • 14. 14 Embedded finance will help scale businesses by generating new revenue streams Embedded finance will help scale businesses by generating new revenue streams Increase in business revenue: Businesses can leverage embedded finance to increase revenue by offering financial services on their platforms, positively impacting customer retention and average ticket size. According to experts, 87% of businesses believe embedded finance will significantly impact their growth and revenue in the next three years. Additionally, 15% of enterprises believe that embedded finance will drive revenue for their company. Low cost of acquisition: Embedded finance helps businesses acquire customers through an established channel leading to low customer acquisition cost. Seamless customer journey: Embedded finance helps improve customer experience as customers can avail different options (pay for a product, buy insurance, take credit, etc.) without leaving the app/website while making purchase. Provides a competitive edge: Offering financial products/services at the time of checkout can make it more appealing for customers, providing a unique selling point compared to competitors. How Indians access banking products first shifted from bank branches to banking apps. Today, it’s the shift from banking apps to all other apps. In the future every banking product from deposits to insurance will happen on third party applica- tions as well as bank apps. Embedded finance infra companies will be the key enablers of this trend, and new types of products will be born as a result. Sahil Kini, Co-Founder CEO, Setu
  • 15. RuPay to increase businesses' reach with a large-scale financial inclusion approach RuPay to increase businesses' reach with a large-scale financial inclusion approach RuPay helps businesses grow RuPay helps businesses grow RuPay, derived from Rupee and Payment , is India’s global card payment network, which works across ATMs, POS devices and e-Commerce websites and supports domestic and international transactions. At the beginning of FY22-23, RuPay was accepted in over 200 countries at ~4.2 Cr PoS locations and ~0.2 Cr ATMs. The Pradhan Mantri Jan-Dhan Yojana (PMJDY), launched in 2014, contributed to the significant growth of RuPay cards by providing banking services to the underprivileged. As of January 2022, there were ~65 Cr RuPay debit cards in circulation, accounting for 65% of the total debit cards issued, according to the RBI. By December 2022, ~30 Cr e-Commerce transactions were made using RuPay. RuPay e-Commerce merchant wise transactions – Mar’23 Source(s): NPCI, Redseer Analysis Source(s): NPCI, Note(s): The list is not exhaustive (XXXX) Indicates merchant category codes(MCC) High transactions Digital goods- games (5816) Insurance sales (6300) Colleges, universities (8220) Apparel accessories store(5699) Restaurants (5812) Tax payments (9311) Utilities (4900) Cab services (4121) Fast food restaurants (5814) Cable, satellite and other television services (4899) Travel agencies tour operators (4722) Grocery store supermarkets (5411) Medium transactions Reaching out to rural and untapped customers: Businesses can expand their product reach to the untapped population who have now access to bank accounts through PMJDY. Improvement in bottom-line performance: Zero MDR helps businesses save costs and improve profitability compared to card transactions that charge 1.5-2% as transaction fees. CAGR ~140 ~150 FY21 FY22 FY23 FY26F ~180 ~320 ~80% ~20% ~20% ~70% ~56% ~51% ~44% ~49% ~30% RuPay transactional volume (In Cr) Low transactions 15 POS e-Commerce
  • 16. Emerging trends that will help businesses draw new customers Emerging trends that will help businesses draw new customers Technology and security advancements have made online payments an easy and trustworthy process for customers, resulting in a surge in demand for convenient payment options. This has fostered greater collaboration between fintech companies, businesses, and the government to provide the same. This synergy is expected to drive more exciting innovations in the payment space in India. Emerging Trends Elaboration Use Cases/Target audience Future Growth Implication on businesses e-Rupi/CBDC Prepaid e-vouchers are shared with the beneficiary via SMS or QR codes and redeemed without cards or online payment apps. Currently used for disbursal of government benefits (Covid vaccinations) Retail e-Rupi (launched in December 2022) is an electronic currency used primarily for retail transactions. Retail e-Rupi witnessed ~800K transactional volume within two months since its launch. We predict that it will continue to grow owing to factors like high digital penetration for small-value transactions and high currency-to-GDP ratio. Improved customer experience and larger customer base as the transaction can happen without a bank account. Voice payments Enables online transactions via voice/call. Urban: (Introducing superior customer experience) Rural: Immense potential among feature phone users Globally, by 2030, ~50% of the transactions will take place through voice technologies. Wide customer reach across all city tier levels. Wearable payment devices A wearable device directly linked to the consumer’s bank account and functions as a debit card. Millennials and GenZ Users can tap the wearable device during checkout without using physical cards. The Indian wearable market is valued at INR 1.1 Lakh Cr in FY22 and expected to reach INR 1.4 Lakh Cr by FY2030. Enable omni-channel user experience, thereby increasing the businesses' revenue and customer experience. High customer retention rate due to the ease of making payments. Biometric payments Biometric payments is a technology that uses biometric authentication based on the user’s physical characteristics of users, such as fingerprints, facial recognitions, and iris. Individuals can save their biometric patterns on the payment page which can be used to make payments without the need for physical cards or user details. Globally, biometric payment is expected to grow to ~INR 4.2 Lakh Cr by 2028 from ~INR 2.4 Lakh Cr in 2021. China, Japan and India are the leaders among the Asia-pacific countries Facilitates seamless customer experience, as payments are more rapid and secured. Decreases transaction cost as only fewer fraudulent transactions needs to be processed. Source(s): Redseer IP 16
  • 17. Conclusion In summary, India has witnessed a huge shift in the payments landscape, owing to the emergence of technologies like UPI, BBPS, embedded finance, voice payments, e-RUPI, and biometrics. This shift has fuelled the growth of the digital payment ecosystem, which is currently valued at around ~INR 3.2K Lakh Cr and expected to grow to ~INR 4K Lakh Cr by FY26. In the next three years, we can expect to see a continued emphasis on the development of new payment technologies. Businesses that can integrate these technologies into their payments strategies will be best positioned to thrive as they can streamline their operations, reduce costs, and enhance customer satisfaction. However, with the growth of digital payments comes the challenge of ensuring cybersecurity, fraud mitigation, data security and system readiness and availability. India is at the helm of digital transformation. We are in the cricket stadium, the first ball is yet to be bowled, the crowd is cheering and that’s where we are at when it comes to online payments. There is still massive potential waiting to be unlocked. CEO, Pine Labs Amrish Rau 17
  • 18. Glossary Category Keywords Definition/Terms/Acronyms General CAGR GOI Metro Cities Tier I cities Tier II cities Tier III smaller cities IoT AI ML Blockchain GenZ Millennials PMJDY Buisnesses Financial Cr RBI NPCI NIPL Digital payments Online payments Transactional Value Transactional Volume P2M MDR India Stack CBDC UPI BBPS Recurring payment Non-recurring payments Embedded Payments Embedded Investments BNPL ATM POS Reserve Bank of India National Payment Corporation of India NPCI International Payment Limited Transfer of payments via offline or online channel Transfer of payments using digital devices like mobile, computer, etc On an average, customer spending on each purchase. Total number of transactions processed through a platform Peer to merchant Merchant discount rate Set of APIs which allows the government and private companies to allow cashless transactions Central bank digital currencies are digital form of country’s fiat currency Unified payment interface Bharat bill payment system Model where money is automatically deducted from customer’s account at scheduled intervals Refers to payments that happen just once It refers to the system where non-financial companies integrate wallet-based payment option onto their apps/websites. It refers to the system where non-financial companies integrate investing options onto their apps/websites. Buy now pay later Automated teller machine Point of sale refers to a place where customers make the payment for goods and services. Sectors e-Commerce Mobility e-Health Buying and selling of goods and services online Booking of inter-city cabs/bikes via online platform Purchase of health-care products/services online 18 Compounded annual growth rate The year stated in the report is financial year Government of India Mumbai, Delhi, Bangalore, Chennai, Hyderabad, Kolkata, Pune and Ahmedabad (8 cities) Top 12 cities in India by population beyond metro cities Beyond 100 cities by population Internet of Things Artificial Intelligence Machine Learning System in which record of transaction is maintained across computers, linked in a peer-to-peer network Pradhan Mantri Jan Dhan Yojna Includes merchants, traders and service providers Top 20-100 cities in India by population Peoplebornbetween1981-1996 People born between 1997-2012 Crore (10⁷) Year (FY) K Thousand (10³) Million (10⁶) Billion (10⁹) M B
  • 19. About Plural *Plural by Pine Labs has received an in-principle authorisation from the Reserve Bank of India (RBI) to operate as a Payment Aggregator. Setu has received an in-principle authorisation from the Reserve Bank of India (RBI) to operate as an Account Aggregator. Plural by Pine Labs offers online payment solutions and more for businesses. Contact us to know more. Plural* was launched by Pine Labs in October 2021 to provide online payments solutions to business- es. Plural’s products include payment gateway, affordability suite, payment links, card tokenisa- tion, subscription solutions, banking, payouts and more. Pine Labs also acquired Setu in June 2022. Setu is a fintech API Infrastructure startup—that builds APIs for customer onboarding, BBPS payments, and other embedded finance solutions. These APIs are used by several top fintech and financial institutions to build powerful and personalized journeys for their users. Presented below are Plural’s payment offerings: Embedded Finance - API Stack • Enable Fixed Deposits • BBPS Bill Pay • Lending Enabler Banking and Payouts • Current Account • Vendor Payouts • Reconciliation Customer onboarding and verification • KYC • Account Aggregator* • Reverse Penny Drop -Industry First Payment collection • Payment Gateway • Payment Links • Affordability Suite - EMIs, Cashbacks, Offers and more • BBPS Bill Collect • Subscriptions with UPI Autopay 19 750+Customers 9.9M+ transactions processed INR 250B worth of transactions processed 15+ banking partnerships 125 team strength
  • 20. About Redseer Redseer Strategy Consultants is a leading strategy consulting firm that has been at the forefront of shaping the internet business landscape in India for the past 13 years. Our relentless focus on innovation, deep consumer understanding, and a strong entrepreneurial mindset have established us as the go-to advisory firm for new-age consumer-focused businesses. With a rich portfolio of over 500 successful engagements, Redseer has become synonymous with growth advi- sory, digital strategy, and investment thesis formulation. We have helped numerous organizations unlock their full potential and achieve sustainable growth in the ever-evolving Internet economy. Our expertise extends beyond providing strategic guidance. Redseer has emerged as the most widely quoted consulting firm in the media, cementing our position as thought leaders in the industry. We are proud to have a market share of over 90% in new-age IPOs, with notable engagements including Zomato, GoTo, Nykaa, Paytm, Cartrade, and Delhivery. These successful IPOs are a testament to our deep understanding of the consumer tech space and our ability to navigate the complexities of the market. Redseer’s impact goes beyond IPOs. We enjoy more than 50% market share in new-age deal advisory and a lion’s share in the strategy consulting space. Our proprietary methodologies, high-quality research, and a team of dynamic consultants have disrupted the traditional management consulting industry, positioning us as the most sought-after advisory firm for consumer-focused businesses. Headquartered in Bengaluru, India, Redseer has a strong presence across the globe, with offices in the Middle East, Southeast Asia, USA, and the UK. Our team of over 1000 consultants bring diverse expertise and a passion for delivering results. We pride ourselves on being nimble, adaptable, and agile, ensuring that we are always ahead of the curve in an ever-changing business landscape. 20
  • 21. Authors Milind Nigam Business Analyst, Redseer Pooja Varma Associate Consultant, Redseer 57% 53% Anuj Kumar Director, Redseer Amrita Konaiagari Sr. Manager, Brand Product Marketing Plural by Pine Labs Kanishka Mohan Partner, Redseer Swapnika Pervela Associate Director, Brand Product Marketing Plural by Pine Labs 21
  • 22. Disclaimer Copyright © Redseer Management Consulting Private Limited (“Redseer”). All rights reserved. While we have made every attempt to ensure that the information contained in this report has been obtained from reliable sources, all data and information provided in this report is intended solely for informa- tion purposes and general guidance on matters of interest for the personal use of the reader, who shall accept full responsibility for its use. Redseer does and seeks to do business with companies covered in its research reports. As a result, readers should be aware that Redseer may have a conflict of interest that could affect the objectivity of the report. All information in this report is provided “as is”, with no guarantee of completeness and/or accuracy of the results obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchant- ability and fitness for a particular purpose. All trademarks, logos and brand names are the property of their respective owners and are used in this report for identification purposes only. Given the changing nature of laws and the inherent hazards of electronic communication, there may be delays, omissions or inaccuracies in the information contained in this report. Accordingly, the information in this report is provided with the understanding that the authors herein are not engaged in rendering legal, accounting, tax, or other profes- sional advice or services. As such, it should not be used as a substitute for consultation with professional advisers. This report cannot be sold for consideration, within or outside India, without the express written permission of Redseer. In no event shall Redseer or its partners, employees or agents, be liable to you or anyone else for any decision made or action taken in reliance on the information in this report or for any errors, omissions, or delays in the content of this report or any losses, injuries, or damages including any incidental or any consequential, special or similar loss or damages, arising out of, or in connection with the use of this report. 22