Mobile wallet payments have gained significant prominence in India with mobile and digital wallets gradually replacing traditional payments such as cash and cards as retailers from street merchants to big chains prefer mobile payments, finds GlobalData, a leading data and analytics company.

India is one of the most developed mobile wallet markets in the world, with mobile wallets currently being widely used for day-to-day transactions at supermarkets, grocery stores, and street vendors. The high cost of POS terminals and generally inadequate payment infrastructure have pushed both merchants and consumers to switch from cash to mobile-based payments, skipping payment cards.

GlobalData’s 2022 Financial Services Consumer Survey* reveals that India is among the top in terms of mobile wallet adoption and usage globally with 90% survey respondents indicating that they have a mobile wallet and used it in the past 12 months. The adoption level is much higher compared to developed markets like the US and the UK, where consumers still predominantly use cards.

Ravi Sharma, Banking and Payments Lead Analyst at GlobalData, comments: “The availability of high-speed internet facility at low cost, coupled with the rise in smartphone penetration has laid the foundation for mobile payments to thrive in India. This is also supported by progressive government reforms, growing financial literacy, rise in tech savvy consumers and proliferation of mobile payment solutions.”

The growth in mobile payments is supported by the government’s initiatives to accelerate electronic payments and reduce the use of cash in the country as part of its ‘Digital India’ campaign.

The government also introduced Payments Infrastructure Development Fund (PIDF) in January 2021 to offer subsidies to merchants to set up infrastructure to accept card and QR code- based payments. It has also mandated all mobile wallets and QR-codes to be interoperable, effective from 1 April 2022, to enable convenient mobile-based payments to any merchant.

As of June 2022, 11.4 million digital devices were deployed at merchant outlets for QR code-based payment acceptance with the support from this fund.

Sharma explains: “The growth in mobile wallet payments in India has been largely driven by the government-backed instant payment system, Unified Payments Interface (UPI), which enables users to make payments directly from their bank accounts using recipients’ mobile number or scanning QR code. Many mobile wallets, including Paytm, PhonePe, Amazon Pay, and Google Pay have integrated UPI into their services to enable direct payments. With a rise in mobile payments, PhonePe alone registered 2.5 billion transactions in March 2022, up from 1 billion during the same month last year.”

To push the adoption, the government also abolished the merchant service fee on payment transactions made using UPI as well as RuPay cards (government-backed card scheme) from 1 January 2020. In addition, all businesses with an annual turnover of more than INR500 million ($6.7 million) must provide their customers with the option to pay electronically via UPI QR codes and RuPay debit cards.

Sharma concludes: “The mobile wallets market in India is in high growth phase. The government’s push and improving mobile payment acceptance infrastructure will further drive the mobile wallets usage, thereby helping the country to become a less cash economy.”

*GlobalData’s 2022 Financial Services Consumer Survey was carried out during Q1 and Q2 2022. Approximately 50,000 respondents aged 18+ were surveyed across 40 countries.