How India spends: UPI reigns supreme, credit cards see 2nd-highest growth

The Unified Payments Interface (UPI) remains the undisputed king of digital payments in India. Transactions via UPI saw a staggering 56 per cent growth in volume compared to the same period last year, reaching a massive 65.77 billion transactions in the second half of 2023, according to a new report by Worldline,  a global leader in payment services. 

The report titled ' India Digital Payments Report for H2 2023' also revealed that the value of these UPI transactions surged by 44%, totaling Rs 99.68 trillion.

  An interesting finding is the decline in the average ticket size (ATS) for UPI transactions. This dropped by 8 per cent to Rs 1515 from Rs 1648 in the year-ago period, suggesting a deeper integration of UPI for smaller, everyday purchases. This trend is primarily driven by the significant increase in person-to-merchant (P2M) transactions, which grew by a remarkable 77% in volume.

 

Some of the key findings:

Payments Acceptance Infrastructure

Between July 2022 and December 2023, there was a notable increase in the payment’s acceptance infrastructure channels. Point of Sale (PoS) terminals expanded by 26% to reach 8.56 million. Private Sector banks dominated the space with 73% market share while Public Sector Banks accounted for 18%. Payments and foreign banks have 8% and 1% market share respectively. Bharat QR (BQR) usage grew by 32% to 5.96 million. The standout, as expected, is UPI QRs which grew by 57% to 317 million. 

Top PoS Deployers:

Axis Bank, ICICI Bank, HDFC Bank, State Bank Of India, RBL Bank, Paytm Payments Bank, IndusInd Bank, Kotak Mahindra Bank, Yes Bank, and Canara Bank accounted for 94% of terminals deployed as of December 2023.

Top UPI apps, Remitter and Beneficiary banks: In terms of volume and value, PhonePe, Google Pay and Paytm were the dominant UPI app players. In December 2023 the 3 apps accounted 95.4% of all the transactions in terms of volume which was 94.8% in December 2022, while in terms of value they together comprised 93% in December 2023 which was 92.2% in the same period last year. The dominance is likely a blend of early mover advantage and the convenience, features, discounts, and deals provided by the apps.

The top 5 remitter and beneficiary banks (in December 2023) are the below and are being driven by PhonePe and Google Pay; Paytm rides on the rails of Paytm Payments Bank rails while the other 2 use the rails of other banks.

(Note: this report is for H2 2023 and therefore before the RBI action on Paytm Payments Bank.)

Growth in Mobile Payments:  Overall, mobile payments saw a solid 38% increase in volume and a 31% increase in value compared to the same period last year, which indicates a strong shift towards mobile phone-based payment methods across various channels, not just UPI.

Credit, Debit and Prepaid cards

While UPI is dominating the scene, cards haven't disappeared. The total number of cards in circulation grew by a modest 6% to reach 1.384 billion. Interestingly, credit cards witnessed the highest growth (21%) compared to debit cards (2%) and prepaid cards (13%). However, the volume of card transactions actually declined by 7%, primarily due to a decrease in debit card transactions

The total number of cards in circulation has shown a modest growth in the past one year. In December 2023, the total number of cards were 1.384 billion, a 6% YoY increase. Credit cards witnessed the highest upsurge on a yearly basis with a growth of 21% at 97.9 million. This was followed by Prepaid cards with a YoY growth of 13% at 325 million. Debit cards witnessed a minuscule growth of 2% at 960.8 million.

Average Ticket Size (INR)

The top 5 issuers of credit cards were HDFC, SBI, ICICI, Axis and Kotak respectively and the top 5 issuers of debit cards were SBI, Bank of Baroda, Canara Bank, Union Bank of India and HDFC Bank. 

At least 71% of credit cards were issued by private sector banks and 24% were by public sector banks while 65% of debit cards were issued by public sector banks and 24% by private sector banks. The balance was issued by payment banks, small finance banks and foreign banks. 

"The distinction between private sector banks dominating credit card issuance and public sector banks dominating debit card issuance is clear suggesting the risk appetite among the former is higher while the latter is focused on providing accounts to a larger section of the population including the unbanked," noted the report. 

However, volume of card transactions in H2 2023 declined to 3.70 billion, marking a 7% decrease from H2 2022. This decline was predominantly propelled by debit card transactions, whereas credit card transactions experienced an upswing.

Debit card transactions in H2 2023 were recorded at 1.15 billion witnessing a decline of 34% YoY. Credit Card transactions on the other hand were at 1.78 billion with a YoY upsurge of 21% when compared to H2 2022.

Credit card transactions value in was Rs 9.39 trillion, a rise of 11%  on year while, during the same period, debit cards transaction value was Rs 3.02 trillion, a fall of 16%. 

Credit card have been consistently on the rise; in H1 2022, credit transactions increased by an impressive 30.5% YoY.

The average ticket size (ATS) for credit cards in the second half of 2023 was Rs 5276, an 8% growth and prepaid cards ATS was Rs 310, a 28% decrease and debit cards ATS was Rs 2642, a strong 24% growth. "Like the previous half, the growth in debit card ATS suggests that while debit card transactions volume fell, there was still a significant population that used debit cards for their purchases and that ensured that transactions value did not fall parallelly," said the report. 

The total value of card transactions in H2 2023 for online purchases surged by 24% to Rs 7.34 trillion compared to H2 2022. During the same period, the value of credit card transactions soared by 40% to Rs 6.12 trillion, while debit card transactions decreased by 18% to Rs 1.03 trillion, and prepaid card transactions dropped by 32% to Rs 190 billion. 

"This indicates that UPI transactions are increasingly dominating other channels, both at Point of Sale (PoS) and online. However, credit card expenditures are rising due to heightened consumption of higher value goods and services," the report added.