Digital payments in India are seeing flourishing development with a compound annual growth rate (CAGR) of 12.7 per cent in the quantity of non-money exchanges, global advisory KPMG said on Thursday.

In a brief period of two to three years, the amount of merchants accepting digital payment methods has risen to over 10 million. A KPMG report said that the mobile payment revolution in the country has led to a boom in the number of merchants adopting digital payments with close to 1.5 million digital payment acceptance locations in 2016-17.

“The mobile payment revolution with its evolving form factors has led to a boom in the number of merchants adopting digital payments. From close to 1.5 million digital payment acceptance locations in 2016-17, the number of merchants accepting digital payments modes has increased to over 10 million, in a short span of two to three years,” the report “Fintech in India – Powering mobile payments said.

The global digital payments market is expected to touch $10.07 trillion by 2026.

QR-code based wallet acceptance points with low set up costs have been instrumental in driving mass adoption among merchants, thereby increasing convenience for customers as well, creating a virtuous cycle for the ecosystem, the report said.

According to KPMG, wallet players was one of the main variables that played a transformative role and democratized mobile payments in India. Payment ease, ubiquity and comfort were the factors that resulted in wallets being widely adopted.

The mobile wallet market is expected to continue its expansion at a CAGR of nearly 52.2 per cent by volume during 2019-23, it added.

Another factor that has led to the next wave in mobile payments is the Unified Payments Interface (UPI)-based real-time payments. The volume of UPI transactions has increased at a CAGR of 246 per cent during the period from 2016-17 to 2018-19.

Some variables such as interoperability and the chance of origination across various platforms such as mobile wallets further fuel the development of UPI operations.

Mobile payments have witnessed a major shift in the past five years with the proliferation of payments like UPI, mobile wallets, Bharat Interface for Money (BHIM), BharatQR and Unstructured Supplementary Service Data (USSD), it said.

The Indian Reserve Bank predicted a 50 per cent rise in mobile-based payment operations according to its’ 2021 vision document.’ This change can be ascribed to driving factors such as robust payment facilities, shape factor development, structured information accessibility, change in customer behaviour, and the government’s vision of transforming India into a cashless economy.

According to the report, while feature phones were limited to USSD, a host of form factors and access to payment technologies were opened up by the advent of smartphones and the Internet

(With inputs from IANS)