Key facts
- Contactless card payments are rapidly increasing in India, with some estimates suggesting they represent up to one-third of all card transactions.
- Industry data indicates a 40% year-over-year increase in contactless payments over the past two years.
- Younger, digital-first consumers, particularly Gen Z, are driving the shift towards tap-and-pay methods.
- The expansion of contactless-enabled payment infrastructure and consumer preference for speed are key factors.
- The Reserve Bank of India currently permits pin-less contactless transactions up to Rs 5,000.
Contactless card payments are experiencing rapid growth in India, with industry insiders estimating they now constitute up to a third of all card transactions. This surge is largely attributed to younger consumers, particularly the Gen Z demographic, who prefer the speed and convenience of 'tap-and-pay' technology.
While the Reserve Bank of India does not release specific data on contactless payment shares, industry estimates point to a significant annual increase. Ramakrishnan Gopalan, head of products and solutions for India and South Asia at Visa, noted a strong shift towards contactless usage at point-of-sale terminals, aligning with broader industry trends.
The rise in contactless payments occurs as overall card usage and physical cash payments decline, overshadowed by the overwhelming popularity of UPI transactions. RBI data shows a consistent decrease in debit card usage at offline stores, while credit card transactions have seen an increase, with consumers increasingly opting for tap-and-pay over chip-and-pin.
Industry data indicates a substantial rise in contactless card payments, from approximately 2.5% in 2018 to around 16% in 2021. Payment industry executives attribute this trend to consumer preference for speed in high-frequency retail environments and the expanding availability of contactless acceptance infrastructure. Anil Goteti, founder of Scapia, stated that for their digital-first users, tapping is the default payment method, with tap-and-pay accounting for 30% of Scapia's point-of-sale transaction volume.
Ketan Patel, CEO of MSwipe, reported a 40% year-on-year increase in tap-and-pay transactions on their platform, with contactless payments making up 12-15% of their total face-to-face transactions. The current RBI limit for pin-less contactless transactions is Rs 5,000, and industry insiders believe an increase in this limit could further accelerate the shift in payment behavior, given improved security measures minimizing misuse risks.
Payment processors are anticipating changes in payment terminals, with a potential shift towards cheaper, tap-only terminals, especially among large retail merchants. The upcoming launch of Apple Pay in India is also expected to influence consumer habits, potentially leading some premium consumers to abandon chip payments altogether. The broader future of payments is seen as a combination of QR code-based UPI transactions and near-field communication (NFC) technology via smartphones. Visa has supported this trend by enabling contactless payments in nearly 5,000 outlets across India.