Accelerated Migration to Digital Transactions in India Led By UPI

The UPI system has supercharged India’s transition to non-cash payments, especially in person-to-person (P2P) fund transfers and low value merchant (P2M) payments. 

UPI saw about 9x transaction volume increase in past 3 years, increasing from 5 billion transactions in FY19 to about 46 billion transactions in FY22; accounting 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. 

This is just the beginning of the journey; UPI is estimated to grow and drive ~75% of total digital transaction volumes in five years. The pandemic has been a watershed moment for disruptions in customer behaviour, ushering irrevocable changes to the way we live, play and work. 

More than a 50% jump was observed in monthly transaction volumes across UPI, BBPS, Immediate Payment Service (IMPS) over 6 months following the imposition of lockdown in March 2020. 

The BCG Center for Customer Insight’s (CCI) Covid-19 Consumer Sentiment Survey conducted in July-August 2020 showed a marked decrease in cash usage among 50% customers, with more than 60% customers shifting to UPI and digital wallets as compared to pre-covid times. 

60% of surveyed customers showed a strong likelihood of continued use of digital payments in the future, a trend that is evident in the recent increase in digital payments. Let's have a look at the Volume of Non-Cash Transactions over the years in India:

FY19

UPI: 16%

Prepaid Instruments: 13%

Internet Banking: 6%

POS (Point Of Sales): 18%

NACH (National Automated Clearing House): 9%

NEFT (National Electronic Funds Transfer): 7%

ATM (Automated Teller Machine): 29%

Cheque: 3%

FY22

UPI: 63%

Prepaid Instruments: 9%

Internet Banking: 9%

POS (Point Of Sales): 5%

NACH (National Automated Clearing House): 4%

NEFT (National Electronic Funds Transfer): 6%

ATM (Automated Teller Machine): 4%

Cheque: 1%

FY26 (Projected)

UPI: 73%

Prepaid Instruments: 8%

Internet Banking: 8%

POS (Point Of Sales): 5%

NACH (National Automated Clearing House): 2%

NEFT (National Electronic Funds Transfer): 0%

ATM (Automated Teller Machine): 4%

Cheque: 0%

What is your most preferred mode of payment?