Insights

Digital Payments is a Pan India Habit

A deep-dive into how and why ‘Bharat’ transacts digitally

Bhanu woke up this morning, started to make tea and realised they were out of milk. His parents and wife would be up soon. Still sleepy, he steps out to the grocery store around the corner, picks up two milk packets and scans the QR to pay. At 12.30 pm. Radha, Bhanu’s wife, asked him to run to the ATM to get cash. The maid needs her salary two days early. He sighs, about to put his shoes on when the maid calls from the other room, “Bhaiya phone pe transfer kardo, chalega!"

For ‘tankhwah’ and ‘kiraya’, for ‘shagun’ and ‘jugaad’ - digital payments are now a pan India habit!


Democratizing access with smart tech on smartphones

More than 300 million Indian smartphone users now use digital payments. 96% of all data consumed in India has been via 4G connections. Increasing Internet penetration and extensive use of smartphones by Indians irrespective of age, gender, and educational background is making technological inclusion a reality in ‘Bharat’. Geographically, PhonePe has seen digital transactions from across 19,098 pin codes since last year, constituting over 99% of the country. We have almost 13.3 Cr. monthly active users, and nearly 80% of our transactions come from tier 2, tier 3, tier 4 cities and beyond.

Big Things that happen in our Small Towns

The next phase of digital payments growth is being driven by over 500 million Indians residing in ‘Bharat’, where smartphone penetration, cheaper data, intuitive & simple app design, and more local language context are propelling the move towards larger adoption.

Monthly Active Users - Geographic Split

How Bharat Spends Digitally

It has been particularly interesting to gauge the emerging transaction patterns of Tier-2 and 3 cities. The Peer to Peer category saw a higher percentage of Tier-2 and 3 users transacting than ever before. Examining transactions across categories such as peer-to-peer payments (P2P), merchant transactions and recharges and bill payments, we see slight variations in trends across city tiers. While the recharges and bill payments, and P2P categories are indexed slightly higher in Tier 2 cities and beyond, the opposite is true for the merchant transactions category, which is more indexed in Tier 1 cities.

Tier wise distribution of transactions across categories

Across locations, P2P transactions constitute a significant percentage of the total transactions, with the share going up as one moves from Tier 1 to Tier 3 cities. Interestingly, Tier 3 cities see 49% transactions via the P2P use case.

While city tier wise trends are useful, looking at the pin code wise penetration lends an even clearer picture of the spread of digital payments in the country. In the year 2020 and 2021, we saw users and transactions from over 19,098 pin codes in the country, representing over 99% coverage of the overall pincodes in India.

Even more remarkable though, was the growth of financial services across this demographic. In Patiala, the average Mutual Funds investment size is Rs. 30,000, which is 2.5x of Mumbai! In Palghar, customers have invested about Rs. 4400 in Mutual Funds on an average. Financial Services have seen rapid traction across Tier 2, Tier 3 cities and beyond on PhonePe, with many first time investors and insurance buyers.

Interestingly, PhonePe’s insurance offering is largely purchased (more than 2/3rds) from customers in Tier 3 cities and beyond. The PhonePe platform has also seen gold purchases from over 99% pin codes and mutual fund investments from over 95% pin codes in the country. These statistics are a clear indicator of how digital payment apps are making insurance and investment products more accessible to users across India.

Furthermore, the average transaction values since the launch of these categories (spanning insurance, investments and gold purchases) have gone up by 100-400% across the board, indicating an increase in customer awareness and trust.

Digital payments in India are at an inflection point. Increased awareness, convenience and reliability have made Tier-2 and Tier-3 consumers a lot more receptive to digital payments modes. To super-charge the next phase, PhonePe will continue building solutions that can solve problems for ‘Bharat’ and not just India. Solving for language localization, consumer education, simplified onboarding etc., besides developing specific products for feature phones will be key in driving user adoption. From deep investments in tech infrastructure offering the best in terms of reliability and scalability, to building India’s most comprehensive financial services platform, and expanding the merchant acceptance network across tier 2, tier 3 and beyond, PhonePe is committed to making digital payments for all Indians a reality. The path ahead for digital payments is certainly exciting, and we are looking forward to the journey!