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Prepaid instrument (wallet) transactions have grown 124% to 747 million in FY16 from 66 million transactions in FY13, according to a digital payments report by Google and the Boston Consulting group. In contrast, mobile banking transactions grew by 94% from 53 million transactions in FY13 to 387 million transactions in FY16.

However, transaction size in mobile banking is significantly higher with an average Rs 10,394 per transaction in FY16, while prepaid instruments had a lower average transaction size of Rs 618 in the same financial year.

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Digital transaction in India made through mobile wallets, electronic clearance systems (ECS), and at POS counters, witnessed a 52% year-over-year (y-o-y) growth in FY14-15, the report added. However, in 2013-15, cash based transactions made via cheque, cash, and at ATMs in India consisted for at least half (50%) of the overall payments category.

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Around 65% of customers who were aware of digital payments instruments moved to a trial stage or simply looked to experience cashless transactions digitally. While 81% of users of a digital payment instruments prefer it to any  other on-cash or net-banking method, credit/debit cards. Users in metro cities are increasingly ‘transiting’ towards digital payment methods, because of 24×7 access, and fast response rate of those transactions.

Note that these indicators are based on Nielsen’s research with over 3,500 respondents, combined with BCG and Google’s industry intelligence.

Reason for using digital payment

Around 66% of respondents in metro cities and 51% in non-metro cities think that ease of access or the ability of ‘one-click-payments’ is the most important reason behind using them. While 57% of respondents in non-metro cities and 48% in metro cities use them because of attractive offers and deals. While convenience factors of not carrying cash or change is the least attractive reason for respondent in both metro and non-metro cities alike.

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What they are using it for

Around 66% of respondents in metro cities and 73% in non-metro locations used digital payments to make a prepaid mobile recharge. This was closely followed by mobile bill payments and other utility bill payments. Only 36% of respondents used digital payments for E-commerce in metro cities while in non-metro cities 14% of them used for e-commerce transactions. This was followed by travel bookings, and fund transfers respectively. In-store POS payments was the least reason for use.

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Consumers willing to try POS transactions

Digital transactions made at POS counters are currently the least preferred reason for using cashless payments, while the report claims this is due to low penetration of POS terminals in India. In 2015, there were only 2 POS terminals available per 2,000 debit cards in the country. Around 73% of respondents said that they would like to try out digital payments at food and entertainment outlets, and 71% said that they would try it out at organized retail outlets as well. While 66% of them said they would try digital payments at offline stores with POS counters run by e-commerce companies, followed by POS counters for utility bills (61%), travel and transport (49) and un-organzied retail(48%) sectors.

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Other highlights from the report

The key barriers to adoption of digital payments according to respondents include habit to use cash (68%), complexity of use (55%), and lack of compelling value proposition (48%). While interestingly only 27% of respondents are reluctant to use digital payments due t fraud/hidden charges.

-According to respondents, they stopped using digital payments because of the need to remember multiple usernames/passwords (47%), non-acceptance at certain outlets/merchants(44%), possibility of technical/human error (43%), less balance (42%), fraud (29), and hidden charges (10%).

-According 917 merchants surveyed, the key barriers to digital payments for merchants include:  ‘no clear benefits over other payments methods’ (87%), productivity towards cash (78%),  lack of clarity (77%), not enough customer pull (67%), and technical issues (48%).

Download the report here