As finance minister Nirmala Sitharaman proposed to allocate INR 1,500 Cr to boost the penetration of digital payments in India, the National Payments Corporation of India (NPCI) reported a minor bump in UPI transactions for January 2021. UPI recorded 2.30 Bn transactions in January 2021, which is just 3% higher than the 2.23 Bn transactions recorded in December 2020. The transaction volume also increased by 3% from INR 4.16 Lakh Cr to INR 4.31 Lakh Cr.
The digital payments system crossed the 2 Bn mark in transactions in October 2020, exactly a year after completing 1 Bn transactions per month. In November 2020, UPI reported a 2.21 Bn transactions worth INR 3.90 Lakh Cr, representing a 7% transactional increase from October.
UPI is currently the most popular digital payments system in India, with more than 207 banks linked to it. The State Bank of India (SBI) was leading the segment by processing about 641.62 Mn transactions, as of December 2020. It was followed by HDFC Bank with 198.89 Mn transactions, Axis Bank with 198.24 Mn, ICIC Bank with 189.24 Mn and Paytm Payments Bank with 147.56 Mn transactions.
In terms of third-party apps, PhonePe recorded 902.03 Mn transactions worth INR 1.82 Lakh Cr in December 2020. Google Pay stood at the second spot with 854.49 Mn transactions worth INR 1.76 Lakh Cr. It was followers by Paytm Payments Bank App with 256.36 Mn transactions worth INR 31.2K Cr. WhatsApp, on the other hand, recorded only 810K transactions worth INR 95.45 Cr.
Looking at this strong growth, it will be hard to believe that UPI transactions had dipped below the billion mark in April in aftermath of Covid-induced lockdown and restrictions. Even before the market recorded, UPI started recording a steady growth and claiming the top spot in terms of digital payments.
To grow the digital payments ecosystem even further, finance minister Nirmala Sitharaman, during her Union Budget speech for 2021, has proposed to allocate INR 1,500 Cr to boost the penetration of digital payments as well as other measures to boost financial inclusion.
The digital payments ecosystem has increased at a compound annual growth rate (CAGR) of 55.1% over the past five years between 2016-2020, according to the Reserve Bank of India (RBI) data. During this period, transactional value has grown from INR 920.38 lakh Cr to INR 1,623.05 lakh Cr, representing an annual compounded rate of 15.2%.