New Delhi: Retail online transaction platform UPI will likely continue to dominate the digital payments space in the country even as newer methods such as BNPL and digital currency are expected to define the future of payments, a study has said.

Unified Payments Interface (UPI), Buy Now Pay Later (BNPL), Central Bank Digital Currency (CBDC), and offline payments will drive the growth of digital payments in India in the next five years, PwC India said in a report.

UPI is expected to continue to be the major contributor in the digital payments space, followed by BNPL, it said. The Indian digital payments market saw steady growth at a CAGR of 23 percent (volume-wise), and is expected to reach 217 billion (21,700 crores) transactions in

FY26 from 59 billion (5,900 crores) in FY22, said the report titled "The Indian Payments Handbook-2021-28.

In 2020-21, UPI transactions reached a record 22 billion (2,200 crores), and it is expected to reach 169 billion (16,900 crores) by 2025-26, growing at a CAGR (compounded annual growth rate) of 122 percent, it said.

Partnerships with other countries in Asia to enable low-value transactions and cross-border remittances through UPI will contribute to this growth. BNPL is currently estimated at Rs 363 billion (Rs 36,300 crore) and is expected to reach Rs 3,191 billion (Rs 3,19,100 crore) by the end of 2025-26, according to the report. "We expect the payments industry to focus heavily on enhancing customer experience and providing customer options for payment, enhancing security, undertaking innovations in technology like distributed ledger technology (DLT) and emerging tech like IoT (Internet of Things) over the next couple of years.

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"With the efforts and initiatives of key stakeholders such as regulators, banks, payment/fintech companies, card networks, and service providers, the industry is going to see tremendous growth in the coming years," Mihir Gandhi, Partner & Payments Transformation Leader, PwC India, said.

Presenting a snapshot of the trends that will contribute to the growth of the digital payments industry in India, the report said that existing products and emerging use cases such as UPI, Fastag, transit (NCMC), and cards will continue to make inroads and gain additional wallet share of the Indian customers. These methods will continue to drive the growth in adoption and transactions numbers, said the report.

Enabling recurring payments and IPO subscriptions along with cross-border remittances will provide a boost to UPI. Parking and fuel payments are being explored as new use cases for Fastag, the PwC report said further.

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"The emergence of new players with a focus on digital journeys and expanding customer base in tier 3 and 4 locations will drive the growth for cards. Integration of NCMC with debit and credit cards alongside prepaid with news of public transport operators going live with acceptance infrastructure will bode well for the transit segment."

Source-PTI