ACI Worldwide — GLOBAL PAYMENT TRENDS — Charting the growth of 'immediate payments'

Real-Time Payments Forecasted to Facilitate 1.12 % of GDP by 2026

The Indian real-time payments market is well developed compared to other markets such as the U.S., the U.K., Canada, and Australia.

In 2021, the country recorded 48.6 billion real-time transactions, more than any other in the world. The widespread adoption of real-time payments resulted in an estimated cost savings of $12.6 billion for Indian businesses and consumers in 2021. This in turn – which helped to unlock $16.4 billion of economic output, which represents 0.56% of the country’s GDP.

With consumers increasingly shifting from cash- to mobile-based real-time payments, skipping payment cards, the share of real-time payments of the total payments volume will rise to over more than 70% in 2026. That would push our forecasts for – with net savings for businesses and consumers forecast to rise to $92.4 billion in 2026, helping to generate an additional $45.9 billion of economic output, (equivalent to 1.12% of the country’s forecasted GDP).

Real-time payments were available in India since the launch of Immediate Payment Service (IMPS) in November 2010. However, the Unified Payments Interface (UPI) (a real-time payments system launched in April 2016 based on IMPS) is the one that disrupted the payments space in the country, enabling real-time payments using QR codes, mobile numbers, and virtual IDs. The wider adoption of UPI-based mobile payment apps, growing acceptance of QR code payments among merchants and increasing preference for digital payments amid the COVID-19 pandemic helped real-time payments account for a 31.3% share of total payments transaction volume in 2021.

Key Stats

Real-Time Payment Types

Single Instance

Bulk Payments

Donations

Collections

Initiation/Authorization Methods

Bank Account

Mobile

QR Code

Year of Real-Time
Payments Launch

2010

Immediate Payment Service (IMPS)

2016

Unified Payments Interface (UPI)

Availability

365

24/7

Message Standard

ISO
8583

ACI’s Take

Astronomical real-time payment volumes for India’s UPI interface are not news. What is news is that growth continues to outperform our forecasters’ best efforts. As a result, we’ve reviewed the actual volumes for 2021, which showed a 22% increase on our forecast. Overall, post-COVID changes to consumer behavior, which has seen UPI’s demographic appeal widen further to include older people, mean transaction volumes still have plenty of room to grow.

Several reasons lie behind UPI’s stunning winning streak. First, it is now the center of an embedded finance ecosystem that is much wider than simply banking and finance apps. Second, it is able to use this position to create a flywheel effect for innovation, generating new use cases to compound its utility for consumers. For evidence of this, look no further than the major upgrades taking place through 2021 and into early 2022, which include new features such as cross-border QR code payments, cardless cash withdrawal, the contactless digital payments solution, and the e-RUPI. (Improved cross-border interoperability includes the rolling out of UPI to Singapore and UAE, with more markets planned — this is a huge opportunity for banks to enable new cross-border use cases for customers.)

Looking ahead to 2022, a mandate capping the market share of large fintechs at 30% becomes applicable early in the year. PhonePe, which is owned by Walmart, and Google Pay are reported to process 46% and around 36% respectively of UPI transactions. Meeting the new mandates will represent a major market adjustment as that excess volume gets re-distributed to other market participants.

In terms of forward planning for banks and other payment players, the volume explosion will continue to be a major challenge. Scalable payment architectures will remain an area of high priority as a result. Fraud prevention and mitigation is also likely to be a defining feature of the market in 2022 and beyond. During the pandemic, banks had to revisit their fraud strategy as instances of scams targeting UPI users increased significantly. If they haven’t already, banks and financial institutions must explore ways to mitigate these threats through a combination of the latest fraud monitoring systems deployed at the enterprise level and educating their customers.

History

August 2010

NPCI conducted a pilot study on a mobile payment system in collaboration with major banks.

November 2010

IMPS was commercially rolled out.

April 2016

NPCI launched UPI with 21member banks leveraging its IMPS infrastructure.

December 2016

NCPI launched the Bharat Interface for Money app, which facilitates payments via UPI.

August 2018

UPI 2.0 was launched, with new features such as higher transaction limits.

June 2020

Launched a cash withdrawal service at merchant outlets via the UPI platform.

July 2020

UPI AutoPay was launched to facilitate recurring payments.

August 2021

NPCI enabled UPI acceptance in the UAE in collaboration with Mashreq Bank.

September 2021

RBI announced UPI link with Singapore’s PayNow instant payment system by July 2022 to enable cross-border transfers.

Mobile Wallet Trends

88.5%

% of adults who have a mobile wallet and have
used it in the past year (2021)

Real-Time Acceptance

Banks

Merchants

Consumers

Billers

Real-Time Total Participants

649

Immediate Payment Service (IMPS)

261

261 Unified Payments Interface (UPI)

Population Banking Level

0.7

Number of debit, credit and
charge cards per adult

Index to global average

Fully Banked
Progressing
Underbanked

Reakl-Time Transactions

48.6B

2021

206.2B

2026f

33.5%

F5 Yr CAGR

Payments Fraud Rate

41.0%

Population who reported being a
victim of fraud in the last 4 years

Top 3 Payment Fraud Types

% of fraud victims	Trend
18% Identity theft
17.1% Card details stolen/skimmed in person
13.7% Confidence trick

Share of Volumes by Payments Instrument

Transactions

Paper-based payments
Electronic payments
Real-time payments

2021

2026

Spend (USD)

2021

2026

Real-Time Payments Volume and Its Share in Overall Non-Paper-Based Transactions, 2015-26f

% of total electronic payments transaction volume

Trends + Data

Cloud Management Platform

72.4%

86.2%

Infrastructure as a Service (IaaS)

72.4%

79.3%

Hybrid Cloud

75.9%

72.4%

Managed Cloud Service

79.3%

75.9%

Current priority
Planned

Platform as a Service (PaaS)

Private Cloud

Software as a Service (SaaS)

Cebr

India, the second-most populous country in the world, is classified as a lower-middle-income country and in 2021 ranked as the seventh largest global economy (Cebr World Economic League Table, 2022).

In 2021, India recorded the largest absolute number of real-time transactions in the world at over 48 billion, representing 31.3% of all transactions in the country. Indian businesses and consumers benefited from an estimated $12.6 billion from the adoption of real-time payments in 2021, which is predominantly driven by net savings in the payment system costs.

Total business- and consumer-level benefits contribute to an economy-wide impact of $16.4 billion of economic output that was facilitated by real-time payments (0.56% of formal GDP); equivalent to the output of approximately 2.5 million workers.

The share of all transactions occurring via real-time instruments is expected to increase significantly to 70.7% by 2026. The strong predicted uptake results in realized business- and consumer-level benefits reaching $92.4 billion in 2026. This is forecasted to facilitate 1.12% of formal GDP, an impact of $45.9 billion in 2026. The scale of this impact is extensive and is equivalent to the output of 5.3 million workers annually.