On The Up And Up: UPI Transactions Cross 11,000 Cr Mark In 2023; PhonePe & Google Pay Top Apps

The Unified Payments Interface (UPI) has arguably been the biggest success story from the India Stack, the set of indigenously developed digital goods for e-governance and improving ease of living. UPI has not only given a boost to digital payments in the country but has also led to the birth of a number of fintech startups over the last few years.

In line with the trajectory of the previous years, 2023 turned out to be an important year for the digital payments system as adoption of UPI continued to increase and it also took further steps to leave its mark on the global map.

The number of UPI transactions surged almost 60% to a record 11,768 Cr in 2023 from 7,404.45 Cr in 2022. The total value of UPI transactions also zoomed over 40% year-on-year (YoY) to INR 182.84 Lakh Cr last year.

With the rising adoption among merchants and users alike, the total value of UPI transactions surpassed the INR 18 Lakh Cr mark for the first time in December 2023. In comparison, the total value of UPI transactions stood at around INR 12.8 Lakh Cr in December 2022.

The Top Players In The UPI Ecosystem

When the National Payments Corporation of India (NPCI) rolled out UPI in 2016 to streamline the online payments and banking experience for businesses and retail users, the digital payments ecosystem had only 21 bank participants.

Signifying the exponential growth of the payments system, the total number of banks on the UPI network crossed the 500 mark in 2023. This number stood at 382 in 2022.

The NPCI has divided the UPI participants into the following categories:

• Payer Payment Service Provider (PSP)
• Payee PSP
• Remitter bank
• Beneficiary bank
• NPCI
• Bank account holders
• Merchants

The State Bank of India, HDFC Bank, Bank of Baroda, Union Bank of India, ICICI Bank, Axis Bank, Kotak Mahindra Bank, and Paytm Payments Bank continued to be among the top few remitter banks in 2023. On the other hand, Yes Bank, Axis Bank, ICICI Bank, and Paytm Payments Bank were among the top few payer and payee PSPs. 

For the uninitiated, the payer PSPs onboard customers onto a UPI app, which allows them to register for UPI services. Meanwhile, payee PSPs onboard customers or merchants to receive money or raise collect requests.

The UPI Apps Landscape

Fintech major PhonePe continued to lead the app race in terms of total number and value of UPI transactions during the first 11 months of 2023, followed by Google Pay and Paytm.

PhonePe processed 4,989.91 Cr UPI transactions worth INR 81.96 Lakh Cr in 2023 till November. This was a sharp jump compared to 3,1142 Cr transactions worth INR 55.71 Lakh Cr which PhonePe processed in the first 11 months of 2022.

While the NPCI has not released the numbers for December yet, the trend is likely to continue in the last month of the year as well.

Google Pay registered a total of 3,740.94 Cr UPI transactions worth INR 56.04 Lakh Cr till November 2023 against 2,264.41 Cr transactions worth INR 39.51 Lakh Cr in the year-ago period.

PhonePe, Google Pay, Paytm, and CRED ruled the UPI space in 2023, together processing 10,296 Cr transactions worth over INR 159 Lakh Cr.

Interestingly, CRED continued to show promising growth in the UPI ecosystem. Its transaction volume surged over 450% to 73.5 Cr during the first 11 months of 2023 from 13.19 Cr in the corresponding period of the previous year. 

Meanwhile, Amazon Pay’s UPI transaction metrics witnessed a degrowth last year. It registered 58.3 Cr UPI transactions worth INR 62,333 Cr till November this year, a decline of almost 21% and over 12% YoY, respectively.

The Biggest UPI Updates Of 2023

Multiple new developments in the UPI ecosystem caught the headlines this year. Besides India inking pacts with several countries to expand the UPI technology, the domestic UPI market also received a boost from the launch of new features such as UPI Lite.

Here’s a quick throwback to the top UPI developments:

• After the introduction of UPI Lite late last year, which allows users to make payments of up to INR 500 without a PIN, top UPI apps launched the UPI Lite wallet this year.
• The RBI announced the launch of new products, like credit lines on UPI, UPI LITE X and Tap & Pay, Hello! UPI, and BillPay Connect, to make UPI payments easier.
• BHIM UPI expanded its presence in Singapore, UAE, Mauritius, Nepal, and Bhutan. The NPCI’s international arm also signed an MoU with France’s Lyra Network for accepting UPI and RuPay Cards in the country. 
• The NPCI introduced an interchange fee of 1.1% on UPI transactions of above INR 2,000 made through prepaid payment instruments (PPI) to merchants.

What’s Next For UPI?

With new features, such as the conversational payment products and UPI Tap & Pay set to go live soon, the year 2024 is expected to further push up the UPI ecosystem.

In December 2023, the RBI also proposed to increase the limit for UPI payments to hospitals and educational institutions to INR 5 Lakh per transaction from INR 1 Lakh earlier. 

Besides, the central bank is also planning to withdraw an additional factor of authentication (AFA) for e-mandates in case of recurring transactions of up to INR 1 Lakh in multiple areas, including subscription to mutual funds, payment of insurance premiums, and payments of credit card bills.

The NPCI also launched ‘UPI for Secondary Market’ in its beta phase for the equity cash segment, with collaborations from key stakeholders, including stock exchanges, depositories, stockbrokers, banks, clearing corporations, and UPI app providers.

The new offerings are expected to make digital payments via UPI more hassle-free while also expanding the scope of the ecosystem across markets. While total UPI transactions are expected to grow, it will be worth watching if PhonePe and Google Pay continue to remain the top two UPI apps in 2024 as well.

[Edited by Vinaykumar Rai]