The landscape of financial transactions has undergone a dramatic shift in recent years. Cash, once the king, is steadily being dethroned by digital alternatives. This trend is particularly pronounced in India, the Middle East, and Africa, where a confluence of factors is driving the growth of digital payments.
India: A digital payments powerhouse
India stands out as a global leader in digital payments. The implementation of the UPI in 2016 proved to be a game-changer. The impact of this real-time, mobile-based system has been phenomenal. India's digital payment volume has climbed at an average annual rate of about 50% over the past five years, according to the International Monetary Fund (IMF).
Today, as India accounts for 46% of all digital payments in the world, the growth can be attributed to several factors:
- Government initiatives: The Reserve Bank of India (RBI) has actively promoted digital payments. Demonetization in 2016, while disruptive in the short term, nudged people towards cashless transactions. UPI's expansion to feature phones further broadens its reach, potentially connecting millions in rural areas
- Smartphone penetration: The rising affordability of smartphones has been a key driver. With a large young population comfortable with mobile technology, India has witnessed a surge in mobile banking and digital wallets
- Focus on financial inclusion: Digital payments offer a convenient and secure way to access financial services, even for the unbanked population. This is crucial for India's economic development
The Middle East: A region on the rise
The Middle East and North Africa (MENA) region has witnessed a significant uptick in digital payments adoption in recent years. While lagging the global average, the region has seen a rise from 34% of the population above 15 making digital payments in 2017 to 45% in 2021, as per the Global Findex data.
This growth can be attributed to:
- Increasing smartphone usage: Similar to India, smartphone penetration is driving mobile-based digital transactions
- Government support: Governments in the region are actively promoting cashless economies through initiatives that incentivize digital payments
- Shifting consumer behavior: The COVID-19 pandemic played a role in accelerating the shift towards digital payments, as cash was perceived as a potential virus carrier
Currently, the MENA digital payments market size is estimated at USD 226.53 billion in 2024, and is expected to reach USD 380.86 billion by 2029, growing at a CAGR of 10.95%.
Africa: A continent poised for growth
Sub-Saharan Africa presents a vast potential for digital payments. The region has seen impressive growth, with digital payment adoption reaching 50% among the population above 15 in 2021, compared to 37% in 2017.
This rapid increase was driven by:
- Mobile money dominance: Mobile money platforms like M-Pesa in Kenya have been instrumental in financial inclusion, particularly in unbanked areas
- Agent banking networks: These networks provide access to financial services in remote locations, bridging the gap for those without access to traditional banks
- Growing internet penetration: Increasing internet access, particularly through mobile data, is paving the way for wider adoption of online payments
In 2024, the total transaction value in the African digital payments market is projected to reach USD 195.50 billion. The same is expected to grow at a CAGR of 12.65% resulting in a projected total amount of USD 314.80bn by 2028.
The future is cashless
The outlook for digital payments in India, the Middle East and Africa is undeniably positive. These regions are poised for continued growth, driven by factors like increasing smartphone penetration, government support and a tech-savvy population.
However, the question that begs to be asked is whether the current digital infrastructure and systems are adequate to adapt to the growing needs of digital payments.
A future-ready payments platform
Most of the payments tech used today by banks and businesses runs on heavy, monolithic architectures. These systems face challenges in terms of scalability, complexity, maintenance and slow release cycles. It is because of these constraints that the current infrastructure might not be able to keep pace with the rising demand for digital payments.
Hence, what the banking and payments industries require is an agile, scalable and resilient technological framework. The tech stack of every bank needs an upgrade so that they are able to achieve their full potential.
This is where FSS BLAZE™ comes in.
FSS BLAZE™ is the payment platform for digital acceleration. A microservices based platform, it offers seamless growth, uninterrupted performance and effortless integration with modern day digital banking solutions. FSS BLAZE™ is built with the intention of offering technology that enables population-scale development and deployment of future-proof payment systems.
All FSS products are now upgraded to the BLAZE™ platform and run to enable unmatched scale and speed. The FSS Payment Gateway, for example, can process more than 5,000 transactions per second using the BLAZE™ architecture.
With FSS BLAZE™, banks, financial institutions and businesses can be ready for the next surge in digital payment transactions.
Learn more about FSS BLAZE™ here.
