India’s digital payments landscape is on the brink of a historic revolution, thanks to the Unified Payments Interface (UPI) system. A recent report by PwC India, titled “The Indian Payments Handbook – 2022-27”, has projected that UPI will achieve a groundbreaking milestone of 1 billion daily transactions by 2026-27.
During the period of 2022-23, UPI accounted for 75 percent of the total transaction volume, signifying a massive shift towards digital payments. In the next five years, UPI is projected to strengthen its grip on the retail digital payments landscape and reach an astounding 90 percent of the total transaction volume.
India’s Evolving Payment Habits
The exponential growth of UPI transactions paints a vivid picture of the nation’s evolving payment habits. With a compounded annual growth rate (CAGR) of 50 percent, the total number of online transactions is projected to surge from 103 billion in FY 2022-23 to 411 billion in FY 2026-27. UPI transactions, in particular, are expected to experience a substantial rise from 83.71 billion in 2022-23 to a staggering 379 billion transactions by 2026-27.
While UPI takes the lead, the report also highlights the significance of credit cards in India’s digital payments landscape. The credit card segment continues to experience robust growth, challenging the traditional dominance of debit cards. According to the report, credit card transactions are projected to surpass debit card transactions by FY 2024-2025, marking a significant turning point. This shift can be attributed to the convenience and versatility offered by credit cards, making them increasingly favored by consumers. Over the next five years, credit card issuance is expected to record a CAGR of 21 percent.
The report emphasises that the payments industry will focus on expanding the ecosystem and developing new use cases for existing payment platforms in the coming years. Areas such as embedded and ecosystem finance, digital lending based on payment transactions, and offline payments are predicted to drive the next phase of growth in the payments industry.
History of the UPI Revolution
UPI, launched in 2016 by the National Payments Corporation of India (NPCI), was introduced as a real-time payment system that aimed to simplify peer-to-peer transactions and facilitate seamless digital payments. While it faced skepticism and doubts about its potential to disrupt India’s predominantly cash-based economy in its early stages, its user-friendly interface and interoperability across various banks and payment apps soon won the hearts of millions of Indians.
UPI’s growth can be attributed to several key factors that contributed to its success
Firstly, the government’s push for digitalization through initiatives like demonetization in 2016 created a favorable environment for UPI to thrive. The sudden scarcity of physical cash led to a surge in digital transactions, with UPI offering a convenient and secure alternative to cash payments.
Secondly, UPI’s open architecture allows seamless integration with various payment service providers and banking apps, enabling users to link their bank accounts directly and initiate transactions effortlessly. This interoperability eliminated the need for multiple payment apps, making UPI an attractive choice for consumers and businesses.
Furthermore, UPI’s innovative features, such as Virtual Payment Addresses (VPAs) and QR code scanning, revolutionized transactions. VPAs eliminated the need for sharing bank account details, providing a safer and more user-friendly experience. QR codes enabled quick, contactless payments, bridging the gap between online and offline transactions.
(Inputs from various news agencies)
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