India to become 50% non-cash economy in consumption in 3 years

India is expected to become a 50 per cent non-cash economy in consumption in the next three years, with person-to-merchant digital transactions reaching over $1.5 trillion by FY26, a report showed on Thursday.

India’s household consumption is expected to reach more than $3 trillion by FY26, largely propelled by the upper-middle and high-income segments, with UPI payments likely making up a significant portion at around $1 trillion person-to-merchant (P2M) payments, according to the report from Bain & Company.

“With the current technical and financial momentum, India is expected to become a nearly 50 per cent non-cash economy in consumption in the next three years with approximately 350-400 million digital consumers,” said Saurabh Trehan, Partner and Leader of the Financial Services (FS) practice, Bain & Company.

This growth could be further propelled to 60-75 per cent in case of continued government incentives and higher traction for UPI 2.0, 123 Lite, credit on UPI, Central Bank Digital Currency (CBDC), he added.

UPI has seen an exponential growth in recent years, with its total annualised transaction value reaching up to $1.7 trillion and its P2M transactions climbing to $380 billion (in FY23), almost twice the amount of credit cards.

This growth is expected to continue at a CAGR of 40-50 per cent, the fastest among payment modes, on the back of rapid merchant acceptance and adoption given zero/low merchant discount rate (MDR), increasing internet penetration, and wider awareness of digital payment methods.