When it comes to India, there are quite a few misconceptions. One of the most common is around the penetration of digitalisation in India, especially digital payments.
For the most part, the penetration of many products and services in India is very low - cars, air conditioners, credit cards, they're all in single digits1, so understandably investors may be under the impression that this is the same for digital payments.
From street vendors to high end shopping malls, India is increasingly seeing the use of scanning QR codes to accept payments, making the region one of the global leaders in this space.
It has all been made possible through UPI, India's popular mobile-based real-time payment system, introduced in 2016. Unlike traditional methods, UPI simplifies transfers using the recipient's UPI ID, be it a mobile number, QR code, or Virtual Payment Address, eliminating account numbers. UPI operates as a digital public infrastructure, allowing seamless interactions for all players, including merchants and customers, without transaction costs.
Couple this technology with a push to increase bank account ownership and the government’s focus on building digital infrastructure, and you’re seeing a rapid penetration of one of the world’s largest populations.
Now, Indians use UPI to pay everyone from vegetable vendors to doctors. More digital transactions are completed in India than any other country according to the government, making up 75% of India’s total payments3, reducing the reliance on cash and credit cards and helping to create a more frictionless economy.
Another fascinating aspect of the Indian digital transformation story is the rollout of cheap smartphones and the uptick in internet penetration. In 2010, internet penetration was a meagre 7.5%4, today it's over 50%5 and growing with 900 million internet users expected by 2025 (roughly three times the US population).
Cheap mobile data is another factor supporting the push towards digital payments. Mobile data can be purchased for about US$0.14 for 1GB a month in India, one of the lowest and most affordable in the world6. This affordability has been a key driver to increasing uptake and penetration of internet use, as well as the services that rely on its availability.
This rapid pace of digitalisation, coupled with a young population eager to adopt and use digital technologies, is playing an important role in the country’s economic trajectory. For investors, it’s further diversifying the share market and making for some exciting investment opportunities.
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1 Cars:Vehicles excluding 2-wheelers. CEIC, China Ministry of Public Security, Hedges & Company. Data for 2022. Air conditioners: International Energy Agency. Data for 2018. Credit Cards: Payments & ecommerce report, PPRO Financial, 2022.
3 UPI revolutionising real time digital payments
4 Internet penetration in India
5 Active internet users in India
