UPI transactions surge 428% in 3 years, debit card spends grow at a slower rate

UPI accounts for over 75 percent of all retail digital transactions in India. It has around 330 million unique users. Over 70 million merchants actively utilise UPI, using 256 million QR codes. PhonePe, Google Pay, and Paytm lead the list of top UPI apps.

In terms of issuance of debit cards, banks issued 85.23 crore cards in July 2020, which has now increased to 97.07 crore.

Commenting on debit card slowing growth, Abhishek Kothari, Chief Executive Officer at Pepper Money India, a consumer finance company said that in the recent past, India has observed a surge in the usage of credit cards hence surpassing debit card usage.

"A significant part of this shift in preference can be attributed to the lack of meaningful rewards on debit cards, which is due to the relatively lower interchange earned by banks on debit cards. Additionally, recent trends in collaboration between banks and fintechs have also provided tailwinds to the adoption of credit cards. Another key reason for the decline in the usage of debit cards for online and physical transactions is its perceived vulnerability to theft and fraud due to its linkage to a user's savings account. Users also seem to believe that reversing a fraudulent transaction and retrieving money becomes more complex in the case of a debit card compared to a credit card," Kothari told CNBC-TV18.com.

The National Payments Corporation of India (NPCI) is now targeting around one billion transactions per day, a threefold increase from current figures, within the next two to three years. Offline UPI is expected to drive the next phase of its expansion, promising developments on the horizon.

NPCI introduced a range of innovative features for the UPI at the Global Fintech Fest 2023. These include instant credit via UPI, UPI Lite X for offline payments, tap and pay, and Hello UPI.