THE RISE OF DIGITAL PAYMENTS & ITS EFFECT ON CONSUMER BEHAVIOUR

Abstract

In less than 10 years, the "extra" feature of retail banking has become the new way people pay for goods and services in everyday transactions. It is estimated that the digital payments market around the world will facilitate about USD 26.9 trillion in value of transactions in 2026 versus USD 1.7 trillion in 2014, an almost 15-fold surge over 12 years, primarily owing to the strong growth in the number of smartphones, the maturing of home-grown real-time payments platforms, such as India's Unified Payments Interface (UPI), and the shift in consumer behaviour towards embracing contactless payments amid the Covid-19 pandemic. This paper looks at the evolution of digital payments and the impact of digital payments on consumers' behaviours, using secondary data and industry report, and academic and survey-based literature. It offers insight on the development of digital payment infrastructure and the psychological and behavioural impact that cashless payments have on spending (e.g. 'pain of paying', impulse buying, and difficulties with budgeting) as well as on what creates drivers for adoption (e.g. cashless is ‘more convenient,' incentives, perceived trust, and regulatory push).

The study provides descriptive and comparative analysis with graphical visualization of global value of transactions growth, India's UPI growth, global payment method mix, drivers for adopting payment methods and regional differences for payment method adoption, all based on secondary transaction data from National Payments Corporation of India (NPCI), Statista, World Bank's Global Findex report and industry sources. The results show that convenience and transaction speed is the most influential factor in adopting cryptocurrencies followed by smartphone/internet access and cashback/reward incentives, while data security and privacy concerns rank as the main hindrance factors for the late adopters and older population segments. Overall, the paper concludes that digital payments have infinitely quantifiable effects on consumer spending habits, driving an acceleration of spending, a decline in cash use, and new saving and budget planning patterns, all but also creating new questions about financial inclusion, risk of overspending and data protection. The paper ends with suggestions for upcoming research topics: central bank digital currencies (CBDCs), embedded finance, agentic and AI payments, and biometric authentication. The Digital payments and consumer behaviour report features the keywords: Digital payments, consumer behaviour, UPI, mobile wallets, cashless economy, fintech adoption, e-commerce, financial inclusion, contactless payments.