• Tier-2 and Tier-3 cities cozy up to digital transactions with total transaction volumes seeing a significant average growth of almost 50% in 2021

• India is becoming healthier with fitness related transactions growing by 611% in 2021

• Further to RBI guidelines, the subscription economy in India is booming with E-mandates growing by 225% in 2021

If the pandemic hastened the adoption of digital payments in 2020, then 2021 was the year that digital payments went truly mainstream. Online payments more than doubled in 2021 growing by 104%. Virtually every sector witnessed growth with Food & Beverages being the top contributing sector with 18.08%. This and more of some interesting insights about digital payments in India in the last 2 years was launched by Razorpay, the Leading Full-stack Financial Solutions Company, in its 10th edition of ‘The (Covid) Era of Rising Fintech (ERF)’ Report. 

Harshil Mathur, CEO and Co-founder of Razorpay said, “Among many disruptions we have seen since the pandemic, the rise of the digital economy has been the most significant one and it is changing the way online payments are happening in India. On one hand, consumers are spending more with the help of user-friendly financial products like BNPL while on the other, they are also saving through investing in mutual funds and indulging in active trading. While the first wave saw digital penetration among the first layer of businesses like D2C brands, the second wave drove more traditional offline businesses to adopt digital modes of transaction. I believe such a transformation of the financial landscape will have profound implications for business, society and government. Today, India is outpacing the world in digital payments.”

The report is based on online transactions held on the Razorpay platform from January to December, 2020 & 2021, it provides a detailed view of the evolving FinTech ecosystem, the digital spending patterns of consumers and an analysis of how different sectors and payment modes performed during 2020 to 2021. 

• Digital transactions are becoming a popular choice in everyday households. Transactions relating to Telecom and Electricity bills saw a soaring growth of 3640% and 2353% respectively, from 2020 to 2021. 

  • Lifestyle and Fashion were the highest contributors of E-commerce transactions in 2020, however, it has been overtaken by Groceries in 2021 which saw a growth of 233%. 

  • More and more people became health conscious in 2021 as fitness related transactions saw growth of 611%. 

  • As expected, almost one-third of all E-commerce transactions took place during the festive season (Sep’21 - Nov’21).

• Growth in Metros and Tier 2 & 3 cities: Delhi pulled ahead of Karnataka in digital transaction volumes, contributed to 18.69% of all online transactions and grew by 208.82% from 2020 to 2021. For the first time, Goa and Jammu & Kashmir warmed up to digital transactions with 162.54% and 161.44% growth rates respectively in 2021. This could possibly be a result of revived tourism in these states. Further, Tier-2 cities and Tier-3 cities recorded a significant average growth of almost 50% in transaction volumes, from 2020 to 2021. 

• Top Contributing Sectors: Food and Beverages and Financial Services sectors were top contributors of the total transactions, followed by Games, Utilities, and E-commerce. 

  • With more people opting for freelancing, Services saw the highest growth of 769.86% in transaction volumes as compared to 2020.

  • Housing and Real Estate was the second fastest-growing sector in 2021. It saw a whopping growth of 315.65% and had 4 times the transactions it did in 2020.

  • With remote/hybrid work becoming the norm, professionals are perhaps settling in their hometowns as this sector in Tier-2 and Tier-3 cities saw an average growth of over 210% as compared to 2020.

  • Online food orders continued to gain popularity, growing by 284.89% in the last one year. 

  • While E-commerce was mostly consumer led in 2020, Wholesale E-commerce grew by over 1500% in 2021 indicating the rise of digital adoption among businesses. 

  • The increase in usage in the Games sector is from the increasing popularity of Fantasy League and Esports. With an increased demand for games among consumers, game developer tools were in demand, with transaction volume for the sub-sector growing by 365.83% in 2021. Interestingly, tier-3 cities saw the highest growth in online gaming with transaction volumes growing by 45.56%.

• Buy Now Pay Later (BNPL) has grown to become among the favourite payment methods, having grown by 637.27% in 2021, as compared to the 569% growth observed in 2020. This indicates that BNPL (Buy Now Pay Later) is perhaps making credit mainstream with easier and faster access. 

• The subscription economy is booming with recurring payments seeing a significant growth of 225.31% in 2021. Other payment methods also contributed significantly to total transactions in 2021, such as UPI (63.02%) and Card (25.92%). Interestingly, bank transfers took a whopping hit in transaction volumes declining by 51.77%.