News & Analysis

90% of Retail Digital Payments via UPI

UPI transactions would likely touch a billion per day by 2026-27 and account for close to 90 percent of all retail digital payments, says PwC report

Digital payments using the Unified Payment Interface (UPI) would touch a billion transactions per day by 2026-27, thus accounting for around 90% of all retail digital payments in the country, says a new report. Over the next five years, UPI payments could account for most of the transaction volumes in retail digital payments, says PwC India in the report. 

In a report titled “The Indian Payments Handbook – 2022-27”, the company said UPI has driven a digital payment revolution in the country, accounting now for about 75% of all transaction volumes in the retail segment during 2022-23. Digital payments grew at a CAGR of 50% in volume terms and will touch 411 billion transactions in FY2027 from 103 billion in FY23. 

“It is estimated that UPI will record 1 billion transactions per day by FY 2026–2027, going from 83.71 billion transactions in 2022-23 to 379 billion transactions by 2026-27,” the report said adding that growth in the card segment remained healthy as both credit and debit came next after UPI in terms of order of preference. 

Credit card transactions will outgrow debit cards

The report claimed that the volume of credit card transactions could surpass those of debit cards by FY25 with issuance of credit cards growing at a healthy 21% CAGR over the next five years. Debit card issuance may grow at just 3% CAGR over the same period, indicating that those with bank accounts may shift over to UPI as a means of transferring money. 

“The decline in debit card usage is because the major use case of debit card transactions is cash withdrawal, which can now be replaced by an easier way of withdrawing cash using UPI,” the report said. According to Mihir Gandhi of PwC India, the next five years will see the payment industry focus on ecosystem expansion and new use cases of existing platforms. 

“Areas like embedded and ecosystem finance, digital lending based on payment transactions and offline payments will drive the next phase of growth for the payments industry. In the ever-evolving Indian payments landscape, innovation and inclusion are paving the way for a seamless digital economy,” Gandhi said. 

The PwC report also noted that revenues through the credit card business accounts for nearly 76 per cent of the overall cards’ revenue in 2022–2023, making it a lucrative business segment for banks, NBFCs and FinTech.

The revenue for credit card issuance increased by 42 per cent in 2022–2023 compared to 2021–2022 and is likely to grow by a CAGR of 33 per cent for the next five years, it added.

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