India’s Unified Payments Interface (UPI) continues to dominate the digital payment landscape, with exponential growth in both volume and value. In 2023-24, UPI recorded 131.12 billion transactions, a 56.6% increase from 83.71 billion the previous year. The value of these transactions surged to ₹199.9 trillion, up 43.7% from ₹139.1 trillion. To put this into perspective, UPI’s transaction value was 33 times higher than that of debit cards.

November 2024 alone saw UPI handling 5.83 billion peer-to-peer (P2P) transactions worth ₹15.56 trillion and 9.64 billion peer-to-merchant (P2M) transactions valued at ₹5.99 trillion. These figures underscore UPI’s versatility, cementing its position as the go-to choice for both personal and business payments.

Small Transactions Reshape Payment Averages

As Indians increasingly turn to digital payments for everyday purchases, the average value of retail digital transactions has dropped sharply. From ₹8,769 in March 2021, it fell 48% to ₹4,560 in March 2024. This shift reflects the growing adoption of digital platforms for small-ticket payments, as highlighted in the Reserve Bank of India’s (RBI) latest report.

Retail digital payments now include methods like UPI, credit and debit cards, mobile wallets, and digital bank transfers. Between 2021 and 2024, the volume of digital payments grew at a compound annual growth rate (CAGR) of 49.9%, while their value grew at 14.1%.

Payments Banks: A Success Story

Payments banks, designed to enhance financial inclusion, are thriving. By March 2024, six operational payments banks collectively managed ₹16,330 crore in deposits, marking a 33.6% increase from ₹12,222 crore in FY23. Total income for these banks grew by 34.3% to ₹45,437 crore, while net profits soared 49.4% to ₹6,219 crore.

The success story doesn’t end there—five out of six payments banks reported operational profits in FY24, demonstrating their ability to leverage technology for seamless banking services.

Credit Cards Shine, Debit Cards Decline

While UPI has surged ahead, credit cards have quietly continued their growth. Credit card transactions grew 22.2% year-on-year, rising from 2.91 billion in 2022-23 to 3.56 billion in 2023-24. Transaction values followed suit, increasing from ₹14.32 trillion to ₹18.31 trillion, making credit cards a preferred choice for high-value purchases.

In contrast, debit card transactions are losing ground. Their volume fell by 33% in 2023-24, dropping from 3.41 billion to 2.28 billion. The value of these transactions also declined, shrinking from ₹7.19 trillion in 2022-23 to ₹5.92 trillion in 2023-24.

Paper-Based Payments Fade Away

Traditional paper-based payment methods like cheques and demand drafts are steadily becoming obsolete. Between 2021 and 2024, their volume contracted at a negative CAGR of 10.1%, while their value saw a 1.6% decline. This shift highlights the growing preference for faster, more efficient digital alternatives.

UPI’s Global Ambitions

India’s UPI system is making its mark internationally. It is now accepted in eight countries, including Singapore, the UAE, Nepal, and Mauritius. The Reserve Bank of India (RBI) is also working to introduce similar real-time payment systems in countries like Peru and Namibia.

In June 2024, the RBI joined Project Nexus, a global initiative to interconnect domestic fast payment systems across Malaysia, the Philippines, Singapore, Thailand, and India. This effort is set to transform cross-border retail payments, making them faster, cheaper, and more accessible.

The Road Ahead for Digital Payments

India’s digital payments landscape is rapidly evolving, fueled by technological advancements and widespread adoption. Initiatives like the National Strategy for Financial Inclusion and UPI’s ongoing expansion are driving this growth.

However, challenges such as cybersecurity risks, digital literacy, and infrastructure gaps in rural areas remain. Addressing these issues will be key to ensuring the continued success and inclusivity of India’s digital payment ecosystem.