Statsguru: Six charts explain the UPI's emerging growth challenge

The uproar over charges for the Unified Payments Interface (UPI) may well reflect how ubiquitous it has become.

There are more than 7 billion transactions every month using the payment system — more than five transactions for every man, woman and child in the country. But challenges may now be beginning to emerge in maintaining its scorching pace of growth because of  a higher base and also other structural factors. Growth numbers have dropped below the triple-digit figures seen since the pandemic began (chart 1).

The value of monthly transactions has been in excess of the Rs 10-trillion mark for 11 months in a row now. But February’s 49 per cent year-on-year growth in transaction value was the lowest since mid-2020 as it is much bigger than other payment methods (chart 2).

Over 70 per cent of total payment volume now takes place through UPI. It was 5.8 per cent in 2017-18. The share of both debit and credit cards is now under 5 per cent (chart 3).

The National Payments Corporation of India, which runs UPI, has clarified that charges only apply to prepaid payment instruments (PPI wallets), which are now part of the interoperable UPI system. The charges apply for transactions in excess of Rs 2,000. An analysis of UPI transactions for February 2023, the latest full month for which data is available, shows that 76 per cent of peer-to-peer payments and 95 per cent of peer-to-merchant payments are under Rs 2,000 (chart 4).

The interoperability of wallets may give a fillip to their use, according to analysts. Despite surging digitisation after the pandemic, wallet volumes are up only by a third since December 2019, while the growth is 13 per cent in value terms (chart 5).

A more structural issue for digitisation is the fact that internet penetration remains low compared to many peer emerging markets. Russia, Brazil, China and South Africa all have between 70 and 90 per cent of the population using the internet. It is under 50 per cent for India (chart 6).