Unified Payments Interface (UPI) clocked 6.6 billion transactions worth Rs 10.73 trillion in August, data released by the National Payments Corporation of India (NPCI) showed. On a month-on-month (m-o-m) basis, UPI transactions grew 4.6% in volume terms and 1% in value terms.
The Reserve Bank of India (RBI) recently mooted the idea of linking UPI to RuPay credit cards to offer a larger set of choices for customers. The industry players said the introduction of this functionality could drive the next phase of UPI growth.
According to the NPCI data, the value of UPI transactions during August this year relates to a total of 657 crore transactions, up from 628 crore in the preceding month.
Rajesh Mirjankar, MD & CEO of Kiya.ai, said the latest transaction numbers are evidence of the popularity of UPI as a preferred mode of payment among a larger set of consumers. “With the acceptance of card payments via UPI the transaction volumes are bound to grow strongly and the average value per transaction too will increase,” he said.
In the last few years, UPI has taken pole position among retail payment channels, eating into the share of card-based transactions. In a recent report, Boston Consulting Group (BCG) and PhonePe pointed out that UPI transaction volumes accounted for more than 60% of non-cash transaction volumes in FY22.
“Led by an open and interoperable architecture with direct payments linked to a bank account without the need to top-up wallets, UPI transactions are at approximately 9x of credit and debit card transactions today in volume terms in FY22,” the report said, adding that UPI is estimated to grow and drive 75% of total digital transaction volumes in the next five years.
UPI attracts no fee from the merchant, and many have seen this feature as the chief reason behind the increased adoption of the channel. If market-determined merchant discount rates (MDRs) get applied to credit card-linked UPI transactions, they could reverse the gains achieved in terms of digital adoption, some analysts say.
The RBI floated a discussion paper on charges in the digital payments ecosystem in August, seeking the industry’s views on the reintroduction of MDR on UPI, among other things. However, the Ministry of Finance subsequently made it clear that the government was opposed to the imposition of charges on UPI due to the public good nature of the payments channel.
Finance minister Nirmala Sitharaman said last week that people should be able to access facilities like UPI freely so that the digitisation of the Indian economy becomes attractive to them. “We intend to achieve a higher level of transparency through digitisation. Therefore, we do think it’s not yet time for charging for UPI services,” she said. The minister said if budgetary support to the digital payment ecosystem was found inadequate, it could be addressed separately.