Representative image of UPI payment.
Credit: iStock Images.
Bengaluru: In the second half of 2023, India’s digital payments landscape continued to integrate the Unified Payments Interface (UPI) ecosystem, spearheaded by just three payments providers and a handful of banks. UPI payments volume in H2 2023 surged 56 per cent year-on-year (YoY) to reach 65.77 billion from 42.09 billion in the previous year, while the value of these transactions surged 44 per cent from Rs 69.36 lakh crore to Rs 99.68 lakh crore, surpassed only by net banking where transaction value remains high but volumes comparatively much lower.
The growth of UPI payments is largely driven by person-to-merchant transactions, which saw a 77 per cent increase in volume and 62 per cent in value during this time. Point of sale terminals, used by merchants to receive payments, expanded by 26 per cent to reach 8.56 million, with private banks having a 73 per centshare in this market.
Axis Bank, ICICI Bank, HDFC Bank, State Bank Of India, RBL Bank, Paytm Payments Bank, IndusInd Bank, Kotak Mahindra Bank, Yes Bank, and Canara Bank accounted for 94 per cent of terminals deployed as of December 2023. While payments banks, led by Paytm Bank, accounted for 9 per cent of the share in H2 2023, regulatory actions against the company this year may affect this share split.
At the same time, PhonePe, Google Pay and Paytm continue to dominate the market both in terms of value and volume. In December 2023, the three platforms accounted for 95.4 per cent of all transactions compared to 94.8 per cent a year before. In terms of transaction value, the 3 accounted for 93 per cent in December 2023 compared to 92.2 per cent in Dec 2022, even as the central bank has previously called out this monopoly and has expressed an interest in reversing it.
Another important facet of the ecosystem is the shrinking of the average ticket size within UPI payments, which decreased 8 per cent YoY, indicating a higher penetration of UPI for small and micro everyday payments, typically to merchants. This is indicative in the highest transacting categories, which is topped by groceries, followed by eateries, telecom services, pharmacies and utilities, all of which are typically low in value but higher in volume.
This rise of UPI is also reflected in the stagnation of debit and credit card issuance, which registered a mere 6 per cent YoY increase during the period under review. While credit card issuance saw a jump from 13 per cent in June 2023 to 21 per cent in December 2023, debit cards only grew 2 per cent.