UPI Transactions to Dominate 90% of Retail Digital Payments by 2026-27: Report
Written by Sanjay Kumar
Unified Payments Interface
- Product type – Instant inter-bank payment system
- Owner – National Payments Corporation of India
- Produced by – National Payments Corporation of India
- Country – India
- Introduced – 11 April 2016; 7 years ago
- Markets – India – International Use Through Cross Border Agreement – Bhutan, Nepal, Qatar, Saudi Arabia, Malaysia, Singapore, Thailand, Vietnam, Cambodia, Indonesia, Sri Lanka, Oman, Mauritius, Bahrain, Maldives, United Arab Emirates, Hong Kong, Taiwan, South Korea, Australia, Japan, France, Switzerland, Netherlands, Canada, United Kingdom, European Union, Russia
According to a report titled “The Indian Payments Handbook – 2022-27” by PwC India, Unified Payments Interface (UPI) transactions are expected to reach an impressive milestone of 1 billion transactions per day by 2026-27. UPI has played a vital role in driving the digital payments revolution in India and accounted for around 75 percent of the total transaction volume in the retail segment from 2022 to 2023.
The report projects that UPI will continue to dominate the retail digital payments landscape, accounting for a remarkable 90 percent of the total transaction volume over the next five years. This projection highlights the increasing adoption and reliance on UPI as the preferred mode of digital payment in the country.
The Indian digital payments market has witnessed consistent growth, with a compounded annual growth rate (CAGR) of 50 percent in terms of transaction volume. The report predicts that this growth trajectory will continue, projecting the number of transactions to surge from 103 billion in FY 2022-23 to an astounding 411 billion in FY 2026-27. Specifically, UPI transactions are expected to experience a substantial rise from 83.71 billion in 2022-23 to 379 billion transactions by 2026-27.
While UPI takes the lead, the report also recognizes the significance of the credit card segment, which continues to experience robust growth. Card payments, including both debit and credit cards, remain popular instruments for retail digital payments after UPI. However, the report foresees a shift in dominance between debit and credit cards, with credit card transactions expected to surpass debit card transactions by FY 2024-2025.
Over the next five years, credit card issuance is projected to grow at a healthy CAGR of 21 percent, while debit card issuance is anticipated to have stagnant growth with a CAGR of 3 percent. The decline in debit card usage can be attributed to the fact that UPI-based cash withdrawal methods conveniently replace the primary use case of debit cards, which is cash withdrawal.
Mihir Gandhi, Partner and Payments Transformation Leader at PwC India, emphasizes that the payments industry will focus on ecosystem expansion and the development of new use cases for existing payment platforms in the coming years. Areas such as embedded and ecosystem finance, digital lending based on payment transactions, and offline payments are expected to drive the next phase of growth in the payments industry. Innovation and inclusion play crucial roles in paving the way for a seamless digital economy as the Indian payments landscape continues to evolve.
The report also highlights the significant revenue contribution of the credit card business to the overall card market. In 2022-2023, revenue generated through the credit card segment accounted for nearly 76 percent of the total cards’ revenue, making it an attractive and lucrative business segment for banks, non-banking financial companies (NBFCs), and fintech firms. The revenue from credit card issuance witnessed a substantial increase of 42 percent in 2022-2023 compared to the previous year and is projected to grow at a CAGR of 33 percent over the next five years.
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