UPI transactions to touch 1 billion per day by 2026-27: PwC India

Unified Payments Interface (UPI) transactions in the country are expected to reach 1 billion per day by 2026-27, accounting for 90% of the total transaction volume over the next five years, said a new report published on Sunday by consulting firm PwC India.

UPI is a digital payment gateway system developed by the National Payments Corporation of India (NPCI) and is regulated by the Reserve Bank of India (RBI).

The report added that the Indian digital payments market saw steady growth at a CAGR of 50 per cent (volume-wise) and is expected to reach 411 billion transactions in FY 2026-27 from 103 billion in FY 2022-23, the report said.

According to PwC, since its launch in 2016, UPI has gained “massive acceptance” and has become the preferred mode of digital payment in the country. Being an open-source API (application programming interface) it can be accessed by any mobile payment application built by payment service provider (PSP) apps or Banks and connects banks, merchants, and consumers to facilitate hassle-free and instant transactions.

UPI accounted for approximately 75% of the total transaction volume in the retail segment during the period of 2022-23, the report said, adding that UPI is projected to dominate the retail digital payments landscape even further, accounting for 90% of the retail digital payments.

The PwC data shows UPI grew from 18 million transactions and ₹69.61 billion in FY16–17 to 83,751 million transactions amounting to ₹1,39,204 billion in FY 22–23, contributing to a compound annual growth rate (CAGR) of 234% in transactions and 196% in value.

“In the next five years, the payments industry is expected to focus on ecosystem expansion and new use cases for existing payment platforms,” Mihir Gandhi, Partner & Payments Transformation Leader, PwC India, said in a statement.

At a panel hosted on April 27 at TechCircle Finserv Innovation Summit, Praveena Rai, chief operating officer of National Payments Council of India (NPCI), said the success of UPI can be attributed to its “user experience” that makes users return to a specific product or services. “Creating this stickiness would play a fundamentally bigger role in building an ecosystem of financial services,” she said.

Not only PwC India, according to a report published by payment services provider Worldline in April 2023, in 2022, UPI clocked over 74.05 billion transactions in volume and ₹126 trillion in terms of value. Its transactions volume and value almost doubled since the previous year as it recorded 91% increase in volume and over 76% increase in value in 2022 as compared to 2021, it noted.

Already 30 countries have expressed interest in adopting UPI. In March for example, Singapore started cross-border payments between its national payments system PayNow and UPI. Bhutan and Nepal have also launched UPI, and from April 2023, it will facilitate remittances in 10 locations, including the Australia, UAE and Hong Kong. Private companies in India, such as Google Pay and Walmart’s PhonePe, have also developed apps that use UPI.

Further, UPI is bringing about a shift in the way rural India accesses banking services due to absence of intermediaries, low transaction costs, bringing banking facilities to the remotest villages. RBI announced last year that UPI would be available on feature phones too and users can use UPI features even without an internet connection, a move aimed at boosting the country’s financial inclusion. 

While UPI takes the lead, the report also highlighted the significance of credit cards in India's digital payments landscape. The credit card segment continues to experience robust growth, challenging the traditional dominance of debit cards.

According to the report, credit card transactions are projected to surpass debit card transactions by FY 2024-2025, marking a significant turning point. This shift can be attributed to the convenience and versatility offered by credit cards, making them increasingly favoured by consumers. Over the next five years, credit card issuance is expected to record a CAGR of 21%, it said.

The report emphasised that the payments industry will focus on expanding the ecosystem and developing new use cases for existing payment platforms in the coming years. Areas such as embedded and ecosystem finance, digital lending based on payment transactions, and offline payments are predicted to drive the next phase of growth in the payments industry, it said.