UPI revolutionising digital space; linkage with RuPay game-changer: RBI report

The introduction of the Unified Payment Interface (UPI) has revolutionised the digital space in India and its linkage with RuPay credit cards for payment purposes can be a "game-changing move" in digital payments, says the “India Finance Report 2023” by the Centre for Advanced Financial Research and Learning (CAFRAL).

CAFRAL is a not-for-profit organisation that promotes research and learning in banking and finance, and comes under the RBI.

"UPI usage has exponentially increased since its inception in 2016, with its growth outpacing all other modes of digital payments," says the report, adding that it has immensely helped multiple stakeholders, including individuals, micro, small, and medium enterprises (MSMEs), and especially smaller merchants scale up their businesses. 

"There were over 8.68 billion transactions per month on the UPI network, with over 300 million unique users and close to 400 participating banks, as of March 2023," says the report.

The data shows the size of the value of transactions has grown at a whopping CAGR of 163% from the financial year 2018 to the financial year 2023, and the volume of transactions has grown at a CAGR of 56%.

Additionally, the average size of transactions has also risen from Rs 120 in the financial year 2018 to Rs 1,660 in the financial year 2023. The increase has been fuelled by major payment front-end solutions provided by players like PhonePe, Google Pay, and Paytm, as they accounted for 94% of transactions by volume and 96% by value for March 2023.

The contribution of UPI transactions in total digital transactions by volume has increased from 4% in FY 2018 to 52% in FY2022, which has led India to become a global leader in real-time transactions.

Launched in 2016, UPI allows an instant, real-time payment network and is operated by the National Payments Corporation of India (NPCI). The payment system is built as an "interoperable protocol", which allows third-party vendors to build apps to provide payments as a service.

Apart from UPI uptake, credit and credit debit card usage had also shown constant growth before the COVID-19 pandemic. Post-pandemic, cards in circulation crossed the 1 billion mark, finds CAFRAL report. "These numbers underscore the resiliency of the credit and debit card market despite the pandemic shock, partly attributable to the Jan Dhan accounts, which are issued with debit cards."

The 113-page report also underscores the significant development in the financial space under RuPay — an indigenous card-based payment solution — launched in 2014. "Before RuPay, access to card-based payments was a privilege enjoyed by customers of top banks, ... with the launch of RuPay, debit card ownership has diffused considerably. Over 1,240 banks, including private sector banks, public sector banks, small finance banks, cooperative banks, and regional rural banks, can now issue RuPay cards to their customers." 

RuPay has also shown robust growth in its volume of transactions in the past 5 years, recording a CAGR of around 40% between FY 2017 to FY 2022.