Small ticket transactions drag avg retail payments value by 48% in 3 years

The increasing adoption of digital transactions is evident in the robust growth of India's real-time payments system, Unified Payments Interface (UPI)

The average value of retail digital payments dropped 48 per cent from Rs 8,769 in March 2021 to Rs 4,560 in March 2024 due to a growing preference to use digital modes of transactions for small value payments, according to the Reserve Bank of India’s (RBI) report on the trend and progress of banking in India.

 

A growing adoption of digital modes of transactions is reflected in the euphoric growth of India's real-time payments system Unified Payments Interface (UPI). In 2024 alone, the volume of such transactions was recorded at 155.4 billion, data from the National Payments Corporation of India (NPCI) shows.

   

In November, UPI recorded 5.83 billion peer-to-peer (P2P) and 9.64 billion peer-to-merchant (P2M) transactions valued at Rs 15.56 trillion and Rs 5.99 trillion respectively.

 

Retail digital payments include transactions made through credit and debit cards, UPI, prepaid payment instruments (PPIs) such as mobile wallets, digital bank transfers, among others.

 

Digital payment methods in the country have grown at a compound annual growth rate (CAGR) of 49.9 per cent in volume terms and 14.1 per cent in value terms during 2021 and 2024.

 

However, paper-based instruments such as cheques and demand drafts contracted reporting a negative CAGR of 10.1 per cent in volume terms and 1.6 per cent in value terms during the same time.

 

The volume and value of debit card transactions continued to decline as other digital forms of transactions such as UPI grew.

 

The volume of debit card transactions was recorded at 2.28 billion in 2023-24, a 33 per cent decline from 3.41 billion in the previous year. The value of such transactions declined in the same period from Rs 7.19 trillion in 2022-23 to Rs 5.92 trillion in 2023-24.

 

In comparison, the cumulative volume of UPI payments was recorded at 131.12 billion in 2023-24, a 56.6 per cent increase from 83.71 billion in 2022-23. The value of transactions processed on UPI was 33 times larger than debit cards at Rs 199.9 trillion in 2023-24. This has grown 43.7 per cent from Rs 139.1 trillion in 2022-23.

 

The volume of credit card transactions has continued its growth trajectory. On a year-on-year (YoY) basis, such transactions grew 22.2 per cent from 2.91 billion in 2022-23 to 3.56 billion in 2023-24. The value of such transactions was recorded at Rs 14.32 trillion and Rs 18.31 trillion respectively. 

Payments Bank

 

As of March 2024, the country had six operational payment banks with 82 branches. In the financial year 2024 (FY24), the cumulative deposits at these payment banks were recorded at Rs 16,330 crore, a 33.6 per cent growth from Rs 12,222 crore in FY23. 

 

Payment banks saw their total income rise 34.3 per cent to Rs 45,437 crore in FY24 from Rs 33,827 crore in the previous year. The net profit of the payments bank grew to Rs 6,219 crore, a 49.4 per cent growth from Rs 4,162 crore in FY23. 

 

Five out of the six payments banks reported an operational profit in FY24, the RBI said. 

 

Payments banks (PBs) are specialised financial institutions established to enhance financial inclusion by leveraging technological advancements, according to the RBI. 

 

Internationalisation of payments

 

India's UPI has expanded to eight countries, with the Reserve Bank of India (RBI) planning to deploy a similar real-time payment system in countries such as Peru and Namibia.  

 

UPI is now accepted in countries such as Singapore, the UAE, Nepal, Mauritius, Bhutan, France, Sri Lanka, and the Maldives, as part of efforts to globalise the homegrown fast payments system.

 

In June 2024, the RBI joined Project Nexus, a multilateral international initiative to enable instant cross-border retail payments by interlinking domestic fast payment systems of five countries such as Malaysia, the Philippines, Singapore, Thailand, and India.