UPI Sees Minor Decline In February 2022: INR 8.26 Lakh Cr In Value Across 452 Cr Transactions

India’s flagship digital payments mode, unified payments interface or UPI, recorded 452.7 Cr transactions in February 2022, as per official data released by the National Payments Corporation of India (NPCI), down slightly from the performance in January 2022. The value of transactions also fell to INR 8.26 Lakh Cr in February, as compared to INR 8.31 Lakh Cr in January, across 461 Cr deals.

While the total number of banks live on UPI has increased to 304, compared to 297 in January, this did not have a great impact on the transaction value or volumes. Even in January, the UPI transaction volumes had only increased by 1% from December 2021, with a similar increase in the transaction value as well.

In 2021, UPI enabled 39 Bn financial transactions amounting to business worth $940 Bn, which is equivalent to around 31% of India’s gross domestic product.  While so far the service is available for online payments through smartphones and websites, NPCI is planning to add feature phone support for UPI, which could be more critical to its growth story as well as financial inclusion goals.

It will be interesting to see how the NPCI tracks data for UPI usage outside India, given that Nepal became the first country outside India to adopt the payments platform. The Nepal government and Nepal Rastra Bank are working with the NPCI to bring UPI to Nepalese citizens.

UPI Transaction Cap On The Horizon

While February 2022’s app-wise figures will be released later this month, in January 2022, PhonePe led the UPI app market with INR 4.05 Lakh Cr transactions. Google Pay maintained its second place lead but its transaction value fell to INR 2.98 Lakh Cr in January. Following these were Paytm (INR 85,125 Cr in transactions), Amazon Pay (INR 6,729 Cr in transactions) and WhatsApp Payments (INR 205 Cr in transactions), as seen below.

PhonePe is clearly in the lead when it comes to UPI apps, with a 46% market share in the volume of transactions processed and a transaction volume share of 48.7%. Last month, Google Pay’s market share, only second in line after PhonePe, fell from 37.5% to 34.4%. All UPI apps have to reduce their share of overall transactions to under 30% by the end of 2023, as per NPCI regulations.

What About Zero MDR?

During her Union Budget 2022 address, finance minister Nirmala Sitharaman did propose to renew the INR 1,500 Cr allocation for boosting adoption of digital payments in India, but the biggest question that remains unanswered is the lack of MDR in UPI payments.

The payments ecosystem has been calling for the abolishing of the zero MDR regime for UPI and RuPay transactions, which greatly limit the monetisation potential of UPI-based businesses, particularly for individual-to-merchant transactions. MDR is the fee that a merchant pays to a bank to facilitate a digital transaction and is currently capped at 0.9% of the transaction value for payment channels other than credit cards — for the latter, MDR is market-determined.

The Payments Council of India (PCI), the largest industry body for the digital payments ecosystem, said the industry expects a loss of INR 5,500 Cr due to zero MDR, so while the government has taken steps to boost adoption of digital payments, the question of losses for UPI apps is yet to be answered.

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