Milan, Oct 6 (Reuters) - Digital payments in Italy totalled 206 billion euros ($216 billion) in the first half and are seen reaching 440 billion by the end of the year, nearly matching the value of cash transactions, a report showed on Friday.

After the COVID-19 pandemic boosted cashless payments, growth is now moderating, the report from the Innovative Payments research hub of Milan's Politecnico University School of Management said.

However, at 13% year-on-year in the first half, it remained above an average 10.5% rate recorded between 2016 and 2019.

With less than half of its ageing population possessing basic digital skills, Italy still has "untapped digital potential", according to a previous European Union report, making it an attractive market for electronic payments.

The number of digital transactions rose by 17.6% year-on-year between January and June, reaching 4.5 billion with an average size of 45.7 euros each, the Politecnico University School of Management data showed.

In terms of value, contactless card payments topped 100 billion euros in the first half, the report said.

Driving growth are transactions in shops completed via smartphones and wearable devices which soared 97% year-on-year.

Also on Friday, Italy's payments firm Nexi, Europe's biggest by volumes, said smartphone and smartwatch transactions jumped 123% year-on-year.

Nexi also reported a 47% growth in electronic wallet transactions.($1 = 0.9522 euros) (Reporting by Alberto Chiumento; editing by Valentina Za and Gavin Jones)