#Digitalpayments will constitute nearly 65% of all payments by 2026, up from 40% today. We have witnessed 7x growth in #digitalmerchant payments - from $0.3-0.4 trillion today to $2.5-2.7 trillion by 2026. As a result of this unprecedented growth, digital payments will constitute 2 out of 3 payment transactions by 2026.

The report of BCG and PhonePe speaks on the trends of digital payments scenario in India and say UPI has supercharged India's transition to non-cash payments when it comes to both person-to-person and person-to-merchant transactions.

Not surprisingly, UPI saw about a 9x transaction volume increase in the past 3 years, increasing from 5 billion transactions in FY19 to about 46 billion transactions in FY22, accounting for more than 60% non-cash transaction volumes in FY22. This indicates that digital payment has truly gained ubiquitous acceptance across the country. While Tier 1-2 cities have witnessed high acceptance of digital payments, penetration in Tier 3-6 cities show headroom for growth.

The next wave of growth will now come from Tier 3-6 locations, as evidenced in the past two years wherein Tier 3-6 cities have contributed to nearly 60-70% of new customers for PhonePe. The report also talks about how the digital payments ecosystem has been positively disrupted by the entry of multiple new players with diverse offerings driving digital payments adoption at scale.

Leading global and Indian fintech players have been key drivers of UPI adoption in India among end users, aided by buildout of a large QR-code based merchant acceptance network, and further supported by user-friendly interfaces, innovative offerings and an open API ecosystem. Going forward, Merchant payments will emerge as the most powerful driver of this growth, especially in the offline segment due to growing QR code deployments.

We expect that merchant payments will soon outpace person-to-person fund transfers. Finally, we will increa.