According to a report, 75% of UPI transactions will be made by Person-to-Merchant by 2025
According to a report published consisting of data from the National Payments Corporation of India (NPCI), Person-to-Merchant (P2M) transactions in India are anticipated to make up 75% of all United Payments Interface (UPI) transactions by 2025, driven by zero transaction fees and depth of acceptance. Currently, 56.1% of all UPI transactions are P2M transactions.
Global payments service firm Worldline reported in its "India Digital Payments Report for H1 2023" that the number of UPI transactions in India increased 62% in the first half of 2023 compared to the same period in 2018. P2M transactions have been a major driving force behind this.
Between January and June of this year, there were 51.91 billion UPI transactions, of which 29.15 billion were P2M payments. This corresponds to a share of about 56.1%. The remaining 22.75 billion transactions are between individuals.
Moreover, P2M transactions are growing at a rapid pace. Compared to a 41% increase in Person-to-Person (P2P) transaction volume in the first half of 2023, P2M transactions have jumped 119%.
Even though there are no transaction fees placed on retailers, this surge in P2M transactions shows how deeply both customers and sellers have come to accept this payment method.
In addition to reduced fees, merchants also demand security and prompt payments, and UPI meets these needs. The other reality is that UPI will continue to grow at this rapid rate and become increasingly ingrained in the population as P2M transactions take over.
The report also mentioned that the UPI's Average Ticket Size (ATS) for the first half of 2023 was Rs. 1,604 (US$ 19.29), which was 10% less than Rs. 1,774 (US$ 21.34) for the same time in 2012. When contrasted with the 62% increase in UPI transactions, UPI has improved in terms of penetration and is now being used more frequently for smaller payments.
In terms of value, UPI transactions jumped 47% in the first half of 2023 to Rs. 83.17 trillion (US$ 1.0 trillion) from Rs. 56.59 trillion (US$ 680.62 billion) between January and June 2022.
The reduction in overall ATS has also been led by the reduction of ATS ticket sizes for P2M transactions. There has been a 15% rise in ATS for P2P transactions from Rs. 2,442 (US$ 29.37) to Rs. 2,812 (US$ 33.82). During the same period, the ATS of P2M transactions fell 21% from Rs. 839 (US$ 10.09) to Rs. 659 (US$ 7.93).
The near-universal acceptance of UPI for both personal and payment transactions from the user/buyer side, as well as its high acceptance by businesses, have been major drivers of its expansion. Additionally, UPI has been more widely adopted in rural India.
The report also mentioned that three apps - PhonePe, Google Pay, and Paytm - account for 95.68% of all UPI transactions in India by volume. By value, they make up 93.65% of all transactions as of June 30. The share of PhonePe in the total market, in terms of volume, has remained stable, rising from 45.8% in June 2022 to 47.2% in June 2023. In terms of value, its market share has risen from 48.8% to 49.8%.
Paytm, on the other hand, takes over Google Pay's market share. The market share of Google Pay in terms of UPI transactions decreased from 34% to 13.8%. In parallel, Paytm's market share increased from 14.7% to 34.6%. There was evidence of a similar story in terms of volume. Market share by volume for Google Pay decreased from 34.6% in June 2022 to 10.9% in June 2023. Paytm's stake increased over this time from 9.9% to 33.0%.
Due to Paytm's growth, its Paytm Payment Banks, which had a volume of 11.6 billion, topped the list of UPI beneficiary banks. The State Bank of India (SBI), with 9.6 billion, and Yes Bank, with 5.7 billion, came behind it. With a volume of 46.3 billion, HDFC Bank, on the other hand, was the top UPI remitter bank. It was followed by the Union Bank of India at 32.4 billion and the Bank of Baroda with a volume of 34 billion.
Consumers and businesses alike are drawn to the appeal of digital payments, which has turned it into a necessary feature, stated Mr. Ramesh Narasimhan, Chief Executive Officer (India) at Worldline.
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.