UPI payments a huge success, mobile phones continue to drive digital transactions: Worldline

Worldline, a payment services company, on Tuesday, September 27, launched its India Digital Payments Report for H1 2023 (January to June 2023). The report reveals that the number of UPI transactions in January 2018 which was 15.1 crore has reached 930 crore in June 2023, primarily driven by the growth in Person-to-Merchant (P2M) transactions.

In January 2022, P2M transactions accounted for 40.3 percent of all UPI transactions compared to 57.5 percent in June 2023 and this percentage is likely expected to keep growing, the report said.

The report reveals that in H1 2023 January to June 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 percent in terms of volume and nearly 50 percent of the total transaction value. While in the online space, e-commerce, gaming, utilities, government and financial services amounted to more than 80 percent of the total transaction volume and contributed to more than 75 percent of the total transaction value.

Payments acceptance infrastructure channels saw a surge between January 2022 and June 2023. PoS terminals grew by 44 percent to 80.9 lakh. The standout is UPI QRs which grew by 79 percent (already on a large base) to 27.2 crore.

UPI transaction volume has experienced a major upswing increasing from 460 crore transactions in January 2022 to 930 crore in June 2023. Correspondingly, the transaction value increased from Rs 8.3 lakh crore in January 2022 to nearly doubling to Rs 14.7 lakh crore 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, the report said.

P2P transactions grew from 1,862 crore transactions in H1’22 to 2,275 crore in H1’23, a 22 percent increase.

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 report said.

The average ticket size (ATS) of all UPI transactions in H1’22 was Rs 1,774 compared to Rs 1,604 in H1’23, a 10 percent decrease. When P2P transactions are considered, during the same period, the ATS grew from Rs 2,442 to Rs 2,812, a 15 percent increase. That said, the reduction in overall ATS has been driven by the reduction of ATS ticket sizes of P2M transactions.

Three UPI apps are dominant in terms of volume and value; PhonePe, Google Pay, and Paytm. In terms of transaction volume, in June 2023, the 3 apps accounted for 95.68 percent of all transactions compared to 94.55 percent a year before. In terms of transaction value, the 3 accounted for 93.65 percent in June 2023 compared to 93.38 percent in June 2022.

The top 5 issuers of credit cards are HDFC, SBI, ICICI, Axis and Kotak respectively and the top 5 issuers of debit cards are SBI, Bank of Baroda, Canara Bank, HDFC and Bank of India. For credit cards, 70.1 percent were issued by private sector banks and 24.1 percent by public sector banks while 67.4 percent of debit cards were issued by public sector banks and 22.6 percent by private sector banks. The balance was issued by payment banks, small finance banks and foreign banks.

Mobile payments, which are transactions done using mobile phone apps, have seen solid growth. A significant number of these transactions are UPI-based but could be a whole host of payments using bank accounts etc, the report said.

In a separate development, Takis Georgakopoulos, Global Head of Payments at JP Morgan, recently shared insights at the JP Morgan India conference. During the discussion, he highlighted the transformative impact of UPI on the Indian payments landscape. He also delved into the increasing competition in the sector, driven by both fintech companies and established banks.

Georgakopoulos praised India's unique digital infrastructure and raised questions about the profitability of standalone payments businesses. He emphasised the emergence of new business models and a dynamic environment conducive to startups in the payments sector.