According to PayNXT360’s Q2 2021 Global Prepaid Card Survey, prepaid card market in the India is expected to grow by 34.2% on annual basis to reach US$ 40,319.6 million in 2021.The prepaid card market expected to grow over the forecast period, recording a CAGR of 31.5% during 2021-2025. The prepaid card market in India will increase from US$ 30,038.0 million in 2020 to reach US$ 89,828.7 million by 2025.
The Indian prepaid card market has witnessed significant growth over the last four to six quarters. This growth in the Indian prepaid card market can be primarily attributed to the rising demand for mobile payments, proliferating e-commerce industry, higher adoption of artificial intelligence (AI) and Internet of Things (IoT), as well as the increasing number of unbanked and underbanked population.
Moreover, prepaid cards also help in simplifying the complex billings and transaction processes while offering better control over cash flows. With this context, the Indian business sector is expected to be one of the major sectors rapidly adapting prepaid cards.
Consumers are increasingly using prepaid payment instruments, such as Paytm and PhonePe, to fund their in-store purchases. Notably, digital wallets or prepaid payment instruments were the second-most popular in-store payment method in 2020. According to PayNXT360’s recent survey, digital wallets accounted for more than 20% of the market share after cash payments, which had close to 35% market share in 2020.
RBI makes prepaid cards and digital wallets interoperable:
In May 2021, RBI announced that prepaid payment instruments (PPI) such as Paytm and PhonePe must offer their KYC-compliant users interoperability by 31st March 2022 mandatorily. It means that any user who has a fully compliant digital wallet will be able to send and receive money to and from different digital wallets.
• Under the RBI guidelines, the wallet-based PPIs will have to enable interoperability through UPI, whereas card-based PPIs will have to enable it through card networks. Notably, these new guidelines are a boost for issuers of prepaid digital wallets because they no longer have to build an extensive merchant network that accepts their e-wallets. Any retailer accepting UPI will be able to accept the payments from any prepaid issuer.
Leading companies are going for IPOs:
In India, internet-based businesses are raising funds at a record pace, using the boost provided by the global pandemic to all things digital. Similar trends are visible among prepaid payment instruments looking at India’s public to raise funds. For instance,
• Paytm, one of the leading e-wallet providers in the country, has filed a draft red herring prospectus (DRHP) with the Securities and Exchange Board of India to raise approximately US$2.2 billion from the public. The eleven-year-old start-up has come to some distance from its roots as a tool for consumers to recharge their phone accounts and pay for rides. Notably, the prepaid payment instrument handled US$54 billion (INR 4 trillion) worth of payments to merchants in 2020.