UPI forms 10% of all retail payments in FY21: Report
The National Payments Corporation of India’s (NPCI’S) flagship payment platform — the Unified Payments Interface (UPI) — made up for 10 per cent of overall retail payments in 2020-21, or FY21 (excluding real-time gross settlement), growing at a compound annual growth rate of 400 per cent between 2016-17 (FY17) and FY21, revealed a report by Macquarie Research.
Till a few years back, UPI’S share in overall retail payments was only 2 per cent. Launched in 2016, UPI, albeit a late entrant to the retail payments space, saw its FY21 annual throughput value at ~41 trillion, almost 2.8x that of credit and debit card at point-of-sale (POS) combined, and almost 20x that of prepaid payment instruments (PPIS).
“While the share of UPI has gone up to 10 per cent since FY17, the share of PPIS (wallets, prepaid cards, etc) has remained insignificant (sub-0.5 per cent in overall retail payments),” said the research report. In FY21, UPI clocked the highest number of transactions in volume terms, mainly due to interoperability, opensource platform, ease of use, and zero merchant discount rates.
In FY21, the instant realtime payment system — developed by NPCI for facilitating inter-bank transactions — recorded 22.3 billion transactions in volume terms, amounting to ~41 trillion. While the volume of transactions showed a drop in the initial months of the pandemic, it soon gained momentum, touching new highs every month as the economy gradually opened up.
While a majority of transactions on the UPI platform — almost 81 per cent by value — are peer-to-peer (P2P), suggesting that UPI is replacing cash in the payments ecosystem and hence, leading to more digitisation of the economy, around 19 per cent of transactions are peer-to-merchant (P2M), accounting for nearly ~9.96 trillion, surpassing both credit and debit card POS transaction values. “We believe cards are generally used for transactions with higher ticket sizes, compared to UPI, which is used to make small-ticket purchases. While P2M transactions form 45 per cent of total UPI transactions by volume, in value terms, they constitute just 19 per cent, with an average ticket size of ~700 for FY21,” said the report. “The average ticket size in the P2P segment has been ~2,700. The average credit card transaction size at POS is around ~3,600, while the average spend per card per month is around ~11,00012,000,” added the report.
In July 2021, UPI clocked a record 3.24 billion transactions, up 15.7 per cent from June, when it had processed 2.8 billion transactions.
In value terms, in July, the platform processed transactions worth ~6.06 trillion, up 10.76 per cent from June, which is also an all-time high.
UPI crossed 1 billion transactions for the first time in October 2019. The next 1 billion transactions came in under a year. In October 2020, UPI processed more than 2 billion transactions for the first time.