UPI payments grew 93% YoY to record transactions over INR 41 Lakh Cr in February 2021
The average ticket size of UPI increased 58% to INR 1,800- INR 1,900 in FY21, from INR 1,200 in FY18
UPI may dip in the coming months as lockdown-like situation may prevail in many states amid rising Covid cases
Unified Payments Interface (UPI) has to be one of the biggest success stories of the Indian payments infrastructure, as the system has managed to capture 73% market share of all digital transactions volume within a span of five years. Back in 2018, UPI had a mere 9% share of all digital payments, which was heavily controlled by debit and credit card payments, besides internet banking.
According to a digital payments tracker by Motilal Oswal Financial Services Limited (MOFSL), which analyses digital transactions between FY2020 and till February 2021 (FY2021), UPI payments grew 93% year-on-year to over INR 41 Lakh Cr. Notably, UPI processed transactions worth INR 4.25 Lakh Cr in February 2021, almost doubling from INR 2.22 Lakh Cr in February last year. The UPI transaction volume also grew from 1.32 Bn to 2.2 Bn in the same time frame.
Although, not included in the analysis by Motilal Oswal, UPI transactions in March grew another 19% month-on-month bases to INR 5.04 Lakh Cr. The transaction volume noted a similar momentum, growing to 2.73 Bn; at this pace, UPI will soon cross another milestone of 3 Bn transactions as India’s digital payments infrastructure continues to gain more traction.
The report noted that the average ticket size of UPI increased 58% to INR 1,800- INR 1,900 in FY21, from INR 1,200 of FY18. This indicates growing acceptance of UPI payments for higher value items.
Will UPI Dip Amid Second Covid Wave?
However, it also noted that UPI payments spending could see some moderation as rising Covid-19 cases and ensuring lockdown would result in lower discretionary spending in the travel, tourism and entertainment segment. “Rising share of ecommerce transactions and a gradual recovery in other segments would enable spends to grow at a modest pace in the medium term,” the digital payments tracker report read.
Only last year, as the Indian government announced Covid-induced lockdown and restriction in March-end, UPI plummeted below the billion mark to 990 Mn transactions in April, against 1.25 Bn in the previous month. The value of transactions also fell reaching INR 1.51 Lakh Cr in April, against INR 2.06 Lakh Cr in March 2020.
The fall of discretionary spending in the travel, tourism and entertainment segment was among the top reasons behind the decline, but the payment system regained its momentum in no time as the government lifted the lockdown in July 2020. UPI gradually crossed 2 Bn monthly transactions in October 2020.
As India has recorded 2 Lakh+ Covid positive cases daily, the scope of travel and tourism does look brim. We may be far away from a nation wide lockdown at the moment, but it’s still not out of the picture as Delhi NCR, Maharashtra and Rajasthan announced statewide lockdown-like rules this month. Simultaneously, media reports highlight the scarcity of beds in the hospital, leading to Covid patients dying in hospitals without any medical attention. Needless to say, travel is once again out of the question for many Indians who had just about returned to their daily routines after a year away.