Digital payments in India are surging in the ongoing Covid-19-caused lockdowns which will accelerate mobile data/4G penetration and build an ecosystem of services. According to a research report by CLSA, acceleration in data penetration will especially be positive for Bharti Airtel, as 50 per cent of its subscribers are still to upgrade to 4G, and in services, the latest catalyst will be Reliance Jio's partnership with WhatApp for JioMart ramp-up.
CLSA said that digital payments in India are surging in the ongoing Covid-19-led lockdowns. Already these had jumped three-fold over the last two years to 3 billion transactions a month.
Within digital, mobile accounts for 50-75 per cent of transactions in volume and value. However, India's mobile data penetration is still only 57 per cent even as mobile penetration is 87 per cent. Growing digital payments will accelerate mobile data/4G penetration and build an ecosystem of service, the report said.
Already, India's retail digital payments were expanding with retail digital volumes expanding at 56 per cent compounded annual growth rate (CAGR) from December 2015 to December 2019 and value expanding at 30 per cent CAGR.
RBI data reveals government's demonetisation had brought down cash in circulation as a percentage of GDP to 8.7 per cent in FY17. Subsequently, it increased to 11.2 per cent in FY19 but had still not reached pre-demonetisation levels, underlining rise in digital payments.
"Our talks with a leading mass-market DTH operator reveals that the ongoing all-India lockdown has propelled digital DTH recharges from 60 per cent to 80 per cent within weeks," the report said.
UPI, an instant real-time payment system developed by National Payments Corporation of India (NCPI), which allows instant money transfer between two bank accounts on a mobile platform, is being promoted aggressively by the government.
Launched in April 2016, UPI monthly transactions have risen to 1.3 billion with Rs 2.2 trillion transaction value implying 43 per cent of total digital payment volume and 32 per cent of the total value.
UPI transactions now account for 41 per cent of total mobile banking transactions in value, up from 14 per cent in January 2018 and the government is now taking even more steps to aggressively promote digital payments via UPI in ongoing lockdowns.
The surge in digital payments will accelerate data and services penetration, CLSA said. The latest catalysts for digital services will be Reliance Jio partnership with Facebook's WhatsApp which will accelerate JioMart (O2O offering of Reliance Retail) ramp-up.
Digital payments increase subscribers' engagement with mobile, lower churn and most importantly, the need for digital payments will accelerate mobile data/4G penetration. An acceleration in mobile data penetration will especially be a positive for Bharti Airtel and Vodafone Idea with over 50 per cent of own mobile subscriber base yet to upgrade to 4G.
Further as mobile increasingly becomes the instrument of cashless/digital payment in the short and the long run it will build a growing ecosystem of useful services, CLSA said.