Trends in Indian payments over the next five years

The Indian payments industry is poised for high growth and deep transformation over the next five years (2024-2028), driven primarily by theDigital infrastructure penetration, policy drivers, changing consumer habits and technological innovationDrive. Key trends are analysed below:

1. UPI dominance continues to strengthen

• market size: UPI transaction volume is expected to increase from 10 billion transactions/month in 2023 to 30 billion transactions/month in 2028, accounting for more than 75% of non-cash payments.
• International Expansion: Cross-border UPI co-operation with countries like Singapore and the UAE will be expanded to potentially cover the remittance scenario for the Indian diaspora in South East Asia and the Middle East.
• Functional upgrades: Credit payments (e.g., RuPay credit card tied to UPI), offline transactions, and smart contract functionality will gradually fall into place.

2. Embedded finance and the rise of super applications

• Full Eco-Payment Integration: E-commerce platforms (Flipkart), social apps (WhatsApp Pay) and local service providers (Swiggy, Zomato) will be deeply integrated with payments, creating a closed loop of "shopping-social-finance".
• BNPL explodes with growth: The "buy now, pay later" market size may exceed $20 billion (currently about $3 billion), attracting players such as Paytm and Amazon Pay to enter the market.

3. CBDC (digital rupee) pilot scale-up

• Wholesale CBDC: for inter-bank settlements to enhance the efficiency of cross-border remittances; retail CBDCs may cover 5%-10% population after 2026.
• Policy incentives: The RBI may push merchants to accept the digital rupee through tax incentives or subsidies, especially in the rural financial inclusion sector.

4. AI-driven risk control and personalised services

Fraud detection system response time reduced to milliseconds;
Dynamic credit scoring based on user behaviour covers people with no credit history;

5. Digital penetration of offline payments

QR code/NFC coverage in small and medium-sized cities exceeds 80% (now about 50%);
Wearable device payments (smart bands, etc.) may grow at an annual rate of 40%.

Challenges and risks

1. Data privacy controversy intensifies
2. Network stability issues in rural areas
3. Potential for regulatory tightening triggered by the PAYTM incident

Investors are advised to pay attention:
→ UPI infrastructure provider
→ AI Risk Control Solution Provider
→ Cross-border payment channel construction

Okay, let's move on to delve into other key trends, segmentation opportunities, and potential risk points in the Indian payments industry over the next five years:

6. Revolutionary breakthroughs in cross-border payments

• Real-time cross-border settlement network::
  Interconnection of RBI's fast payment systems (e.g. PayNow) with Singapore, UAE, etc. will be normalised, with a projected cross-border UPI transaction share of 151 TP3T by 2028 (currently <31 TP3T).
  case (law): Handling charges for remittances from Indian labourers to their families in the Philippines through UPI may be reduced from TP51T to less than TP11T.

• The Regulatory Sandbox for Cryptocurrencies::
  Despite caution, India may pilot stablecoins (e.g., INR-anchored tokens) for use in specific international trade scenarios, particularly in the area of software service exports.

7. "Last-mile" solutions for rural financial inclusion

• Voice payment and low-end device adaptation::
  Lightweight UPI apps that support dialectal voice commands (similar to Google Pay Spot) will reach 100 million+ feature phone users.
• Expansion of correspondent banking network::
  Organisations such as India Post Payments Bank (IPPB) are likely to provide cash-to-digital conversion services through 300,000 village-level kiosks.

8. The wave of automation in B2B payments

• Supply Chain Finance Platforms on the Rise::
  TReDS (Trade Receivables Discounting Platform) transaction size may quintuple to $50bn, SMEs can raise funds in seconds with blockchain notes.
• Dynamic Discounting Popularised::
  Automated early payment system based on ERP integration helps suppliers gain 1%-3% additional liquidity benefits.

9. Tipping point for biometric payments

• Market Size Forecast: Fingerprint/facial recognition payment users will increase from 80 million in 2023 to 400 million in 2028.
• Innovative directions: Integration of Aadhaar identity system with in-vehicle payments - "swipe to commute" at petrol pumps/expressway toll plazas.

[New threat matrix analysis] (in order of probability of occurrence)

[Investment hotspot mapping]

pie 

    title Forecast of capital flows in 2028

    "AI Risk Control Tools" : 35%

    "Offline payment hardware (smart POS, etc.)" : 25%

    "SaaS+Payment for Agricultural Supply Chain" :20%

Recommendations for action

1. For entrepreneurs : Development of AR bill scanning tool supporting 12 Indian languages (pain point for rural merchants);