UPI Transactions Surge In India: Transactions Worth 99 Lakh Crore Recorded In 2nd Half Of 2023; Details

India's digital payment ecosystem is witnessing a paradigm shift, with Unified Payments Interface (UPI) emerging as the undisputed champion according to the latest 'India Digital Payments Report' (H2 2023) by Worldline India, a licensed payments aggregator. The report highlights a surge in UPI transactions, indicating a fundamental transformation in how Indians transact financially.

During July to December 2023 (H2 2023), UPI transactions skyrocketed to 65.77 crore, amounting to a staggering Rs 99.68 lakh crore. This growth represents a 56% increase in volume and a 44% surge in value compared to the previous year. Such robust performance solidifies UPI's position as the go-to choice for millions across the country.

While mobile applications constituted the second-largest segment in terms of volume, with 62.96 crore transactions valued at Rs 152.33 lakh crore during the same period, it's important to note that a significant portion of these transactions could be UPI-based, underscoring the widespread adoption of this instant payment system.

Interestingly, even as UPI gains traction, traditional debit card transactions have witnessed a decline both in volume and value, indicating a significant shift in consumer behaviour towards more modern payment methods.

The average ticket size for UPI transactions has steadily declined over time, dropping by 8% from Rs 1,648 in H2 2022 to Rs 1,515 in H2 2023. This trend suggests that UPI is increasingly being utilized for smaller or micro-transactions.

The surge in UPI transactions is predominantly driven by the exponential growth in person-to-merchant (P2M) transactions, with top merchant categories including groceries, restaurants, telecommunication services, and department stores. This surge in transaction volume, coupled with a decline in average ticket size, underscores the expanding footprint of digital payments in everyday transactions.

The success of digital payments hinges on a robust acceptance infrastructure, and India has witnessed significant growth in this regard. Point of sale (PoS) terminals witnessed a 5.4% increase to reach 85,600, while UPI QR code deployments surged by 13% to 31.7 lakh during H2 2023. QR code printouts offer a cost-effective alternative for merchants and a convenient payment option for consumers, driving further adoption.

Leading commercial banks dominate the deployment of PoS machines, with private sector banks commanding a 73% market share. Notable players include Axis Bank, ICICI Bank, HDFC Bank, SBI, RBL Bank, and Paytm Payments Bank.

In terms of UPI apps, PhonePe, Google Pay, and Paytm emerge as the frontrunners, owing to their early mover advantage, user-friendly interfaces, and attractive features and deals. However, it's worth noting that this data predates the RBI's actions on Paytm Payments Bank, and subsequent reports may reflect changes in market dynamics.

Despite the dominance of UPI, net banking transactions continue to play a significant role, especially in high-value transactions such as tax payments by corporates. However, the growth trajectory of net banking transactions is expected to lag behind that of UPI transactions.

The report also sheds light on card transactions, with 138 crore cards issued by banks as of December 2023. While credit card issuances saw a healthy 21% growth, debit card transactions witnessed a decline, driving an overall 7% fall in total card transactions during H2 2023.

With recent regulatory interventions by the RBI, particularly concerning credit cards, the future trajectory of card transactions remains uncertain. It remains to be seen whether these developments will impact issuances and transactions negatively.