 "UPI")
Driven by zero transaction fees and depth of acceptance, person-to-merchant (P2M) transactions in India are expected to account for 75 per cent of all United Payments Interface (UPI) transactions by 2025, a report released on Tuesday showed, citing data from the National Payments Corporation of India (NPCI). Currently, P2M accounts for a share of 56.1 per cent of all UPI transactions.
According to the "India Digital Payments Report for H1 2023" released by global payments service provider Worldline, the number of UPI transactions in India rose 62 per cent in the first six months of 2023 compared to the same period last year. This has been largely driven by P2M transactions.
Out of 51.91 billion UPI transactions between January and June this year, 29.15 billion were P2M payments. This roughly translates to a share of 56.1 per cent. The rest is made up of 22.75 billion person-to-person (P2P) transactions.
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Moreover, P2M transactions are growing at a rapid pace. Compared to a 41 per cent increase in P2P transaction volume in H1 2023, P2M transactions have jumped 119 per cent.
"While some of this growth in P2M transactions can be attributed to zero transaction fees imposed on merchants, it indicates the depth of acceptance of this payment mechanism from both buyers and particularly the sellers," the report said.
"Beyond low fees, merchants are also looking for security, and timely payments, among other things, and UPI delivers here. The other fact is that with the dominance of P2M transactions, UPI is going to become even more entrenched with the population and growth will continue at this rapid pace," it added.
The report added that UPI's average ticket size (ATS) in the first six months of 2023 at Rs 1,604 was 10 per cent lower than Rs 1,774 in the same period last year. When put in juxtaposition with the 62 per cent jump in the number of UPI transactions, it shows that its penetration has improved and is now increasingly being used to make smaller payments.
"A key driver for this growth has been the near-ubiquitous acceptance of UPI for both personal and payment transactions from the user/buyer standpoint as well as high acceptance by merchants. Also, there has been greater penetration of UPI in rural India," it said.
In terms of value, UPI transactions have jumped 47 per cent in H1 2023 to Rs 83.17 trillion from Rs 56.59 trillion between January and June 2022.
The reduction in overall ATS has also been led by the reduction of ATS ticket sizes of P2M transactions. There has been a 15 per cent rise in ATS for P2P transactions from Rs 2,442 to Rs 2,812. During the same period, the ATS of P2M transactions fell 21 per cent from Rs 839 to Rs 659.
"Since the future of UPI is going to be P2M transactions, this is a good trend. It indicates that UPI is increasingly being used for micro-transactions ensuring a greater stickiness for the product," the report said.
