Unified Payments Interface (UPI) has achieved a major milestone, surpassing 10 billion merchant transactions in October 2023. This represents a staggering 53% year-on-year growth, according to data released by the National Payments Corporation of India (NPCI).
UPI Hits Record 10 Billion Merchant Transactions
UPI’s soaring popularity during the festive season has firmly established it as India’s leading merchant payment system, outpacing both credit cards and mobile wallets.
Festive Boost for Digital Payments
The festive season played a pivotal role in driving transactions to unprecedented levels. Overall, 16.5 billion transactions in October, with October 31 setting a new single-day record of 644 million transactions, coinciding with the Diwali celebrations. This remarkable growth has further solidified UPI’s dominance in the digital payments ecosystem.
Deepak Abbot, co-founder of fintech firm Indiagold, highlighted the key factors behind this growth. “The decline in debit card and wallet usage can be attributed to UPI’s growing popularity,” he said. “Debit cards are now mostly used for ATM withdrawals, while mobile wallets are limited to niche use cases like gift cards.”
Shifting Trends in Digital Payments
While it emerged as the leader, other payment methods showed mixed trends. Credit cards witnessed a 35% increase in usage, with 433 million transactions in October compared to 320 million during the same period last year, as per the Reserve Bank of India (RBI).
However, debit cards continued their decline, recording a 24% drop in merchant transactions—falling to 144 million from 190 million in October 2022.
Mobile wallets also saw a significant downturn, processing 442 million transactions in October, a 17% decrease from 533 million transactions recorded a year earlier. Industry analysts attribute this decline to UPI’s seamless user experience and wider acceptance, which have overshadowed the appeal of mobile wallets. Additionally, the suspension of operations by Paytm Payments Bank earlier this year further contributed to the decline in wallet transactions.
Rise in Credit Card Usage
Despite the dominance, credit cards have shown steady growth in recent months. The number of credit cards in circulation reached a record 106 million in October 2023, up from 98 million last year. Outstanding credit card debt also rose significantly, standing at Rs 2.8 lakh crore as of October, compared to Rs 2 lakh crore a year earlier. This growth reflects the increasing reliance on credit cards for larger, high-value purchases, even as UPI continues to dominate day-to-day transactions.
The Future of Digital Payments
The consistent growth underscores its pivotal role in shaping India’s digital economy. With its user-friendly interface, interoperability, and widespread merchant adoption, UPI has become the go-to payment solution for millions of Indians. The platform’s rapid adoption is further bolstered by government initiatives and partnerships with fintech companies to enhance its infrastructure and reach.
However, the rise in credit card transactions indicates that these payment methods are not mutually exclusive but rather complementary. As UPI continues to dominate micro and mid-sized payments, credit cards retain their foothold in high-value transactions, providing a balanced growth trajectory for India’s payment landscape.
A Transformative Era
India’s digital payment revolution has entered a transformative era, with UPI leading the charge. The platform’s ability to facilitate secure, instant, and cost-effective transactions has redefined the way Indians engage with merchants, big and small. As the country’s payment ecosystem evolves, the synergy between UPI, credit cards, and other digital payment tools promises a dynamic and inclusive financial future.
In addition, the government’s ongoing efforts to enhance financial inclusion and digital literacy are expected to further boost the platform’s adoption. Initiatives like incentivizing digital payments, integrating UPI with international platforms, and expanding offline payment capabilities are likely to expand its reach to rural and remote areas. This ensures that the benefits of a cashless economy are accessible to all sections of society.
As fintech companies continue to innovate and introduce new features on the payment platform, the payment system’s growth trajectory seems unstoppable. Experts predict that UPI could soon become a benchmark for global digital payment systems, showcasing India’s technological and economic prowess on the world stage.
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