UPI to capture 90% of retail digital payments by 2026-27
Unified Payment Interface (UPI) has been the main driver of the digital payments revolution in India. First introduced in 2016, it did not take the indigenous payment system much time to grow into a dominant force. That dominance is expected to continue for a while. According to PricewaterhouseCoopers (PwC) India, UPI transactions are likely to account for 90% of retail digital payments by 2026-27.
Why does this story matter?
- The exponential growth of UPI in the past few years has made India one of the leaders in digital payments. According to the FIS Global Payments Report 2023, the usage of cash has declined rapidly in India thanks to UPI.
- No other mode of digital payment was able to do this. For a heavily cash-reliant country like India, it is a massive deal.
UPI transactions will hit 1 billion/day by 2026-27: Report
UPI's growth potential was laid out in a report titled The Indian Payments Handbook 2022-27 by PwC India. According to the report, there will be one billion UPI transactions per day by 2026-27. The total number of transactions will go up from 83.71 billion in 2022-23 to 379 billion. Currently, UPI transactions make up 75% of the transaction volume in the retail segment.
UPI's rise led to corresponding increase in overall digital payments
The report suggests UPI will further its dominance in the retail segment for years to come. Both retailers and customers have shown an inclination toward digital payments in recent years. UPI is their preferred choice. The increase in UPI payments has resulted in a corresponding rise in India's digital payments market. The digital payments market has witnessed consistent growth thanks to UPI's ascendance.
Total transactions to grow at a CAGR of 50%
Per the report, digital payments saw a compounded annual growth rate (CAGR) of 50% in transaction volume. The report predicts this growth to continue over the next few years. Total transactions are expected to rise from 103 billion in 2022-2023 to 411 billion in 2026-2027. The growth in the credit segment will also aid in overall growth.
UPI replaced the major function of debit cards
Card payments are the second-most used mode of retail digital payments after UPI. Among them, credit card payments are expected to overtake debit card payments by 2024-2025. Credit card issuance could grow at a CAGR of 21%, while debt card issuance is expected to stagnate at a CAGR of 3%. The report said UPI replaced the major function of debit cards - cash withdrawal.
