UPI Transactions Rise To 9.3 Bn In June 2023, Driven By P2M: Report

The United Payments Interface (UPI) transactions reached 9.3 billion in June 2023, up from 151 million in January 2018. A key driver for this growth is the widespread acceptance of UPI for both personal and payment transactions from the user/buyer standpoint, as well as its high acceptance by merchants, as revealed in a report on Tuesday.

In January 2022, P2M transactions accounted for 40.3 per cent of all UPI transactions compared to 57.5 per cent in June 2023 and this percentage is likely expected to keep growing, according to India Digital Payments Report for H1 2023 (January to June 2023). 

The average ticket size (ATS), for UPI P2M transactions which was INR 885 in January 2022 has reduced to INR 653 in June 2023 indicating that UPI is now being increasingly used for micro transactions, indicating a further entrenchment of UPI. 

Ramesh Narasimhan, Chief Executive Officer - India, Worldline, commented, “Every passing month serves as a testament to the rapid adoption of digital payments. Looking back at the first half of 2023, I find myself even more optimistic about the payment trends unfolding in India; the impressive performance of UPI, the surge in credit card usage, the jump in mobile payments volume, and the uptick in small ticket size of P2M transactions. All this indicates that broad swathes of the country, rural and urban, are embracing digital payments. The allure of digital payments beckons both consumers and merchants alike, evolving it into an indispensable facet. As the payments landscape of India continues to grow, we at Worldline are enabling secure, hassle-free, and timely payments to suit our customers evolving needs."

The report revealed that in H1 2023, frequently visited in-store merchant categories such as grocery stores, restaurants, service stations, clothing stores, government services, pharmacies and hospitals accounted for around 65 per cent in terms of volume and nearly 50 per cent of the total transaction value. While in the online space, e-commerce, gaming, utilities, government and financial services amounted to more than 80 per cent of the total transaction volume and contributed to more than 75 per cent of the total transaction value. 

Top 10 states and UT with the highest number of transactions at physical touch points in 2022 for Worldline India were Maharashtra, Kerala, Tamil Nadu, Karnataka, Delhi, Telangana, Uttar Pradesh, Gujarat, Andhra Pradesh and West Bengal.

Payments Acceptance Infrastructure

Payments acceptance infrastructure channels saw a surge between January 2022 and June 2023. PoS terminals grew by 44 per cent to 8.09 million while BQRs grew by 21 per cent to 5.69. The standout is UPI QRs which grew by 79 per cent (already on a large base) to 272 million. The growth in PoS terminals has also been helped by the RBI’s PIDF scheme while UPI QR growth has been driven by the private companies dominating UPI acceptance. This growth in UPI QRs is also reflected in the growth in UPI transactions as well as how it has had an impact on other forms of payment.

When comparing H1’23 to H1’22, the volume of UPI transactions increased by 62 per cent from 31.95 billion to 51.91 billion. When the value of transactions is compared, it increased by 47 per cent from INR 56.59 trillion to INR 83.17 trillion. However, the most interesting number is the average ticket size which reduced by 10 per cent from INR 1774 to INR 1604. This is actually a good thing suggesting a deeper embedding of UPI by being used for smaller or micro transactions and this dip has been primarily driven by the growth in person-to-merchant (P2M) transactions.

P2P and P2M Transactions: UPI transactions consist of person-to-person (P2P) and person-to-merchant (P2M) transactions. While both have clocked good growth numbers, the P2M transactions growth is truly impressive. P2P transactions grew from 18.62 billion transactions in H1’22 to 22.75 billion in H1’23; a 22 per cent increase. During the same period, the value of P2P transactions grew from INR 45.52 trillion to INR 63.99, a 41 per cent increase. By contrast, during the same period, P2M transactions volume grew from 13.33 billion to 29.15 billion, a 119 per cent increase while the value grew from INR 11.6 trillion to INR 19.18 trillion, a 72 per cent increase. During the same period, P2M transactions grew from 41 per cent of all UPI transactions to 56 per cent.

While some of this growth in P2M transactions can be attributed to zero transaction fees imposed on merchants, it indicates the depth of acceptance of this payment mechanism from both buyers and particularly the sellers; beyond low fees, merchants are also looking for security, timely payments among other things and UPI delivers here. The other fact is that with the dominance of P2M transactions, UPI is going to become even more entrenched with the population and growth will continue at this rapid pace and the P2M percentage, at current trends, will likely reach 75 per cent of all UPI transactions by 2025.

Average Ticket Size: The average ticket size (ATS) of all UPI transactions in H1’22 was INR 1774 compared to INR 1604 in H1’23, a 10 per cent decrease. When P2P transactions are considered, during the same period, the ATS grew from INR 2442 to INR 2812, a 15 per cent increase. That said, the reduction in overall ATS has been driven by the reduction of ATS ticket sizes of P2M transactions. During the same period, the ATS of P2M transactions fell from INR 839 to INR 659, a 21 per cent reduction. Since the future of UPI is going to be P2M transactions, this is a good trend. It indicates that UPI is increasingly being used for micro transactions ensuring a greater stickiness for the product.

UPI continues to be the dominant payment channel in India dwarfing other payment options. UPI transaction volume has experienced a major upswing increasing from 4.6 billion transactions in January 2022 to 9.3 billion in June 2023. Correspondingly, the transaction value has exhibited a parallel upward trajectory. It increased from INR 8.3 trillion in January 2022 to nearly doubling to an impressive 14.7 trillion in June 2023. A key driver for this growth has been the near-ubiquitous acceptance of UPI for both personal and payment transactions from the user/buyer standpoint as well as a high acceptance by merchants. Also, there has been greater penetration of UPI in rural India.

Credit, Debit and Prepaid cards

The total number of cards in circulation has shown a modest growth over the last 18 months. In June 2023, the total number of cards was 1376 billion, a nine per cent YoY increase. In June 2023, the number of credit cards was 88.68 million, 975.8 million debit cards and 312.1 prepaid cards; this corresponds to a YoY growth of 13 per cent, six per cent and 18 per cent respectively. 

The contrast between private sector banks dominating credit card issuance and public sector banks dominating debit card issuance is clear suggesting the risk appetite among the former is higher while the latter is focused on providing accounts to a larger section of the population including the unbanked. For credit cards, 70.1 per cent were issued by private sector banks and 24.1 per cent by public sector banks while 67.4 per cent of debit cards were issued by public sector banks and 22.6 per cent by private sector banks. The balance was issued by payment banks, small finance banks and foreign banks.

In contrast to card transactions, the volume of card transactions in H1’23 was 3.64 billion, a fall of 8.9 per cent from H1’22. The fall was driven primarily by debit cards followed by prepaid cards. In contrast, credit card transactions saw an upswing. Debit card transactions in H1’23 were 1.379 billion, a huge 28 per cent drop off from H1’22 while prepaid card transactions in H1’23 were 0.711 billion, a drop of 9.2 per cent from H1’22. Meanwhile, credit card transactions in H1’23 were 1.550 billion, a significant increase of 19.6 per cent when compared to H1’22.

This same pattern is repeated in the value of transactions and it appears debit card transactions are/were a casualty of the upswing in UPI transactions while prepaid could be a mixture of UPI transactions as well as the guidelines on prepaid cards issued by the RBI in June 2022; prepaid card transactions have seen a steady decline in both volume and value since then. Credit card transactions which are usually used to make payments of higher value transactions such as for white goods, travel etc. have not been affected.

The value of card transactions in H1’23 was INR 11.35 trillion, an increase of 11.7 per cent from H1’22. This growth was largely supported by credit cards. Credit card transaction value in H1’23 was INR 7.94 trillion, a strong rise of 30.5 per cent from H1’22 while, during the same period, debit cards transaction value was INR 3.17 trillion, a fall of 14.8 per cent while prepaid cards were INR 325 billion, a fall of 32.8 per cent. The average ticket size (ATS) tells an interesting story, particularly for debit cards.

The average ticket size for all cards was INR 3117, a 22.6 per cent YoY increase. This growth was primarily driven by debit card ATS growth. While credit cards ATS in H1’23 was INR 5122, a 9.1 per cent growth and prepaid cards ATS was INR 325, a 26% decrease, debit cards ATS was INR 2303 in H1’23, a strong 18.3 per cent growth. This growth in debit card ATS likely suggests that while debit card transaction volume fell, there was still a significant population that used debit cards for their purchases and that ensured that transaction value did not fall parallelly.

While Net Banking (NB) is traditionally thought of to be where one pays for their goods and services, it also includes payments made by corporates for taxes among many other things explaining the very high numbers. In H1’23, the volume of NB transactions was 2.13 billion, a 1.4 per cent increase from H1’22 (2.10 billion). In terms of value, NB transactions in H1’23 amounted to INR 468.8 trillion compared to INR 442.4 trillion, a 5.9 per cent increase.

In terms of ATS, it was a massive INR 219974 in H1’23 compared to INR 210495 a year before. NB, given its usage, will continue its upward trajectory but the percentage growth will be small just given the massive base.