Worldline, a prominent player in payment services worldwide, has released its India Digital Payments Report for H1 2023 (January to June 2023). This report highlights several significant trends and changes in the digital payments sector. Notably, the report underscores the substantial success of the Unified Payments Interface (UPI) and anticipates its continued dominance in the Indian payment landscape.
The report discloses a remarkable surge in UPI transactions, which have escalated from 151 million in January 2018 to a staggering 9.3 billion by June 2023. This growth has predominantly been propelled by the expansion of Person-to-Merchant (P2M) transactions. In January 2022, P2M transactions constituted 40.3 per cent of all UPI transactions, a figure that has now surged to 57.5 per cent as of June 2023. This percentage is expected to continue its upward trajectory.
Another predictive factor for the future of UPI growth, especially UPI P2M transactions, is the Average Ticket Size (ATS). The ATS for UPI P2M transactions, which stood at ₹885 in January 2022, has declined to ₹653 as of June 2023. This decline suggests that UPI is increasingly being utilized for smaller transactions, further solidifying its position in the payment ecosystem.
Ramesh Narasimhan, Chief Executive Officer, India Worldline, commented, “Every passing month serves as a testament to the rapid adoption of digital payments. Looking back at the first half of 2023, I find myself even more optimistic about the payment trends unfolding in India; the impressive performance of UPI, the surge in credit card usage, the jump in mobile payments volume, and the uptick in small ticket size of P2M transactions.”
Narasimhan added, “All this indicates that broad swathes of the country, rural and urban, are embracing digital payments. The allure of digital payments beckons both consumers and merchants alike, evolving it into an indispensable facet. As the payments landscape of India continues to grow, we at Worldline are enabling secure, hassle-free, and timely payments to suit our customers evolving needs.”
The report discloses that during H1 2023, frequently visited in-store merchant categories, including grocery stores, restaurants, service stations, clothing stores, government services, pharmacies, and hospitals, constituted approximately 65 per cent of the transaction volume and nearly 50 per cent of the total transaction value. On the other hand, in the online realm, e-commerce, gaming, utilities, government services, and financial services accounted for over 80 per cent of the total transaction volume and contributed to more than 75 per cent of the total transaction value.
The top 10 states and union territories in 2022, which recorded the highest number of transactions at physical touchpoints for Worldline India, included Maharashtra, Kerala, Tamil Nadu, Karnataka, Delhi, Telangana, Uttar Pradesh, Gujarat, Andhra Pradesh, and West Bengal. The report also delves extensively into different payment instruments to gain insights into the expansion of the digital payments ecosystem in India.
Payment acceptance infrastructure
The payment acceptance infrastructure channels experienced significant growth from January 2022 to June 2023. Point of Sale (PoS) terminals expanded by 44 per cent to reach 8.09 million, while Bharat QR codes (BQRs) increased by 21 per cent to reach 5.69 million. Notably, UPI QR codes witnessed a remarkable growth of 79 per cent (starting from an already substantial base) to reach 272 million.
The expansion of PoS terminals was supported by the RBI's PIDF scheme, whereas the growth in UPI QR codes was driven by private companies dominating UPI acceptance. This surge in UPI QR codes is also evident in the growth of UPI transactions and its impact on other payment methods.
Dominance of UPI
UPI continues to maintain its dominant position in India, overshadowing other payment alternatives. The volume of UPI transactions has experienced a significant surge, rising from 4.6 billion transactions in January 2022 to a remarkable 9.3 billion in June 2023. Simultaneously, the transaction value has followed a similar upward trajectory, increasing from ₹8.3 trillion in January 2022 to nearly doubling to an impressive 14.7 trillion in June 2023.
This growth can be attributed to several factors, including the widespread acceptance of UPI for both personal and commercial transactions from the perspective of users and buyers, as well as its high adoption rate among merchants. Additionally, there has been an increased penetration of UPI in rural India.
Comparing H1'23 to H1'22, the volume of UPI transactions witnessed a substantial increase of 62 per cent, surging from 31.95 billion to 51.91 billion. In terms of transaction value, there was a notable 47 per cent increase, rising from ₹56.59 trillion to ₹83.17 trillion.
Interestingly, the most noteworthy figure is the average ticket size, which experienced a 10 per cent reduction, declining from ₹1774 to ₹1604. This reduction is a positive development, indicating a deeper integration of UPI into daily transactions, especially for smaller or micro-transactions. This shift has been primarily driven by the growth in P2M transactions.
P2P and P2M transactions: UPI transactions encompass both person-to-person (P2P) and P2M transactions, with both categories displaying impressive growth. P2P transactions increased from 18.62 billion transactions in H1'22 to 22.75 billion in H1'23, marking a 22 per cent rise. Concurrently, the value of P2P transactions surged from ₹45.52 trillion to ₹63.99 trillion, reflecting a 41 per cent increase.
In contrast, during the same period, P2M transactions witnessed remarkable growth, with transaction volume escalating from 13.33 billion to 29.15 billion, a substantial 119 per cent increase. Likewise, the transaction value increased from ₹11.6 trillion to ₹19.18 trillion, demonstrating a 72 per cent increase. Over this time frame, P2M transactions expanded their share of all UPI transactions, growing from 41 per cent to 56 per cent.
While a portion of the surge in P2M transactions can be attributed to the absence of transaction fees imposed on merchants, it also signifies the widespread acceptance of this payment method by both buyers and, notably, sellers. Beyond the appeal of low fees, merchants also value aspects such as security and prompt payments, which UPI consistently provides.
Furthermore, with the increasing dominance of P2M transactions, UPI is set to become even more deeply ingrained within the population, sustaining its rapid growth pace. At the current trajectory, the percentage of P2M transactions is likely to constitute around 75 per cent of all UPI transactions by 2025.
Average ticket size: The average ticket size (ATS) for all UPI transactions in H1'22 stood at ₹1774, compared to ₹1604 in H1'23, marking a 10 per cent decrease. However, when we specifically examine P2P transactions, during the same period, the ATS increased from ₹2442 to ₹2812, reflecting a 15 per cent growth.
It's worth noting that the reduction in the overall ATS can be attributed to the decline in ATS ticket sizes for P2M transactions. Over the same period, the ATS for P2M transactions decreased from ₹839 to ₹659, representing a 21 per cent reduction. As the future of UPI is anticipated to be dominated by P2M transactions, this trend is positive, signifying that UPI is increasingly being utilized for microtransactions, which enhances its overall adoption and utility.
Top UPI apps, remitter and beneficiary banks: Three UPI apps stand out as leaders in both transaction volume and value: PhonePe, Google Pay, and Paytm. In terms of transaction volume, as of June 2023, these three apps collectively accounted for 95.68 per cent of all transactions, compared to 94.55 per cent in the previous year. Concerning transaction value, these three apps represented 93.65 per cent in June 2023, compared to 93.38 per cent in June 2022. This dominance can be attributed to a combination of being early movers in the UPI space and the features they offer within their apps.
Furthermore, the top five banks for both remitters and beneficiaries are influenced by PhonePe and Google Pay, while Paytm relies on its own banking infrastructure, and the other two apps utilize the infrastructure of external banks.
Credit, debit, and prepaid cards
Over the past 18 months, there has been a modest increase in the total number of cards in circulation. As of June 2023, the total number of cards reached 1376 billion, marking a 9 per cent year-on-year (YoY) growth. In the same period, there were 88.68 million credit cards, 975.8 million debit cards, and 312.1 million prepaid cards, representing YoY growth of 13 per cent, 6 per cent, and 18 per cent, respectively. The top 5 issuers of credit cards are HDFC, SBI, ICICI, Axis, and Kotak, while the top five issuers of debit cards are SBI, Bank of Baroda, Canara Bank, HDFC, and Bank of India.
The contrast between private sector banks dominating credit card issuance and public sector banks dominating debit card issuance is evident, indicating a higher risk appetite among the former and a focus on providing accounts to a broader section of the population, including the unbanked, by the latter. Private sector banks issued 70.1 per cent of credit cards and 24.1 per cent of debit cards, while public sector banks issued 67.4 per cent of debit cards and 22.6 per cent of credit cards. The remainder was issued by payment banks, small finance banks, and foreign banks.
However, in contrast to card transactions, the volume of card transactions in H1’23 witnessed a decline of 8.9 per cent from H1’22. Debit card transactions experienced the most significant drop, followed by prepaid cards. Conversely, credit card transactions saw an increase. Debit card transactions in H1’23 totalled 1.379 billion, a substantial 28 per cent decrease from H1’22, while prepaid card transactions in H1’23 amounted to 0.711 billion, a 9.2 per cent decline from H1’22. Meanwhile, credit card transactions in H1’23 reached 1.550 billion, a notable increase of 19.6 per cent compared to H1’22.
This trend also extends to the value of transactions, with debit card transactions seemingly impacted by the upswing in UPI transactions, while prepaid cards may be influenced by both UPI transactions and RBI guidelines issued in June 2022. Credit card transactions, typically used for higher-value purchases such as white goods and travel, have remained unaffected.
The total value of card transactions in H1’23 amounted to ₹11.35 trillion, representing an 11.7 per cent increase from H1’22. This growth was primarily driven by credit cards, which accounted for ₹7.94 trillion in transaction value in H1’23, a substantial rise of 30.5 per cent from H1’22. In contrast, debit card transaction value in the same period was ₹3.17 trillion, a decrease of 14.8 per cent, while prepaid card transactions totalled ₹325 billion, reflecting a 32.8 per cent decline.
The average ticket size (ATS) provides an interesting insight, particularly for debit cards. The ATS for all cards reached ₹3117, marking a YoY increase of 22.6 per cent. This growth was primarily driven by the ATS of debit cards, which stood at ₹2303 in H1’23, showing a robust growth of 18.3 per cent. This increase in debit card ATS suggests that despite a drop in transaction volume, a significant population continued to use debit cards for their purchases, thereby preventing a corresponding decline in transaction value.
Paying using mobile phone apps
Mobile payments, encompassing transactions conducted through mobile phone applications, have experienced robust growth. A significant portion of these transactions relies on UPI, but they can also involve various payment methods linked to bank accounts and more. In H1’23, the volume of mobile transactions reached 52.15 billion, compared to 33.55 billion in H1’22, representing a substantial 55.4 per cent increase. Similarly, the value of mobile transactions in H1’23 amounted to ₹132 trillion, compared to ₹95.32 trillion in H1’22, indicating a notable 38.9 per cent rise. When considering the period between January 2022 and June 2023, the volume witnessed a remarkable 77 per cent increase, while the value surged by 58 per cent.
The average ticket size (ATS) for mobile app transactions in H1’23 stood at ₹2538, marking a 10.6 per cent reduction compared to H1’22. This trend highlights how Indians have readily adopted mobile phones as a preferred means of payment across various channels and for diverse purposes. The sustained growth in mobile payments suggests that this method will remain stable and continue to shape the future of payments in India. The decrease in ATS, similar to UPI, indicates the foundation for ongoing resilience in this payment method.
Using net banking to pay
While Net Banking is commonly associated with individual payments for goods and services, it also encompasses corporate payments, including taxes and various other transactions, which contribute to the high transaction numbers. In H1’23, the volume of NB transactions reached 2.13 billion, reflecting a modest 1.4 per cent increase from H1’22 (2.10 billion). Concerning transaction value, NB transactions in H1’23 totalled ₹468.8 trillion, compared to ₹442.4 trillion in H1’22, indicating a 5.9 per cent increase.
The ATS for Net Banking transactions in H1’23 was a substantial ₹219,974, compared to ₹210,495 a year earlier. Given its extensive usage, NB is expected to maintain its upward trajectory, although the percentage growth may be relatively small due to its already substantial base.
Electronic toll collection
Electronic Toll Collection (ETC) has significantly transformed the way we make toll payments on the country's roads and increasingly at parking facilities and other use cases. Drivers across the nation can attest to the convenience it has brought to road travel, and this consistent adoption is evident in the statistics.
To begin with, the number of ETC tags issued has surged from 45.97 million in January 2022 to 71.92 million in June 2023, marking a substantial 56.5 per cent growth. In terms of transaction volume, ETC transactions in H1’23 reached 1.85 billion, compared to 1.57 billion in H1’22, representing a commendable 17.6 per cent growth. Moreover, the value of ETC transactions in H1’23 amounted to ₹303.4 billion, marking a noteworthy 25.3 per cent increase compared to H1’22 ( ₹242.2 billion).
Considering that ETC tags are now mandatory, this number is poised to continue its steady growth. As new use cases for ETC emerge, this upward trajectory may even accelerate further.