The United Payments Interface (UPI) has revolutionalised payments in India since its launch in 2016. While it took over four years for monthly UPI transaction values to cross the Rs 3 trillion mark in September 2020, the number more than doubled to cross Rs 6 trillion in less than a year by July 2021. This growth was fuelled by increased digital adoption amid the pandemic as people transacted online more than ever.
Dilip Asbe, MD and CEO of the National Payments Corporation of India (NPCI) believes that UPI, which clocks in over 3000 million transactions monthly, may clock in transactions worth $1 billion a day in three years from now.
Speaking to Rajan Anandan, MD of Sequoia India at the Global Fintech Fest, Asbe said that UPI transactions will be well over a trillion dollars in value on an annualized basis in 2021.
“In terms of volume of overall digital payment transactions, NPCI did 55 billion last year. In 2021 we might execute over 70 billion transactions. UPI will make up 40 billion of those transactions. In fact, the value of UPI transactions will be well over $1 trillion on an annualized basis,” he said.
Asbe also sees immense scope for growth and further penetration of digital transactions in India. His confidence comes from the large share of cash in circulation in the economy, despite digital transactions picking pace.
“We are seeing a growth in the number of active users. However, I still believe there is a 10x growth possible because the cash in circulation in the country is still Rs 30 trillion!” he explained.
But with the Zero Merchant Discount Rate (MDR) policy which came into effect in January 2020, where is the money for businesses in payments, Anandan asked Asbe.
“We strongly believe that a reasonable MDR is required. There has been a positive impact of Zero MDR. However, we have been in constant touch with various ministries asking for a reasonable MDR charge. I have pitched to get incentives on providing payment services,” Asbe said, adding that a government announcement should be expected soon on the same.
“The 10x growth we spoke about will only come from more investments in user onboarding and education. Everybody in the supply chain has to make money to fund their platforms and infra. We are hoping that the government will announce something soon,” he added.
With such bullish growth prospects along with widespread adoption by Indians, by when will UPI transactions achieve transactions worth $1 billion per day, Anandan questioned.
“If we maintain status quo, we should achieve that in five years. But we must leverage this accelerated speed of adoption caused by demonetization and subsequently Covid-19. The payments ecosystem must continue to innovate and double up the efforts to achieve this in three years,” Asbe said.
With the Reserve Bank of India’s (RBI) norms for Additional Factor Authentication (AFA) for recurring online transactions kicking in on October 1, NPCI has added AutoPay layers on four platforms -- UPI, RuPay, National Automated Clearing House (NACH) and Bharat Bill Payment Services (BBPS). RuPay and BBPS will enable the AutoPay facility in a month’s time while UPI and NACH have gone live.
“All these four payment systems will compete to get the mandate share in the market. We are not worried about which of the platforms will win, let the users win. In fact, the numbers are very encouraging. Two million users are registering on UPI and NACH AutoPay, each, every month,” Asbe said.
“We want to exit FY22 with having 25 million new registrations per month for overall AutoPay mandates,” he added.
The tables turned as Asbe asked Anandan’s views on ballooning fintech valuations, with Sequoia being one of the most recurring names in the list of recent fintech investors.
“Globally, the most amount of capital is flowing into fintech today. We think this trend is going to continue because it is still in early phases. Digital lending, Buy Now Pay Later (BNPL) have just started. Even payments there is a huge scope for growth,” Anandan explained.
“There is a significant amount of liquidity around the world, that combined with acceleration of adoption of digital payments due to Covid-19 has led to funding going into startups, not just in fintech. That will continue over a decade perspective,” he added.
Anandan further said that that with a longer-term view, the next 20 years will be crucial for India and that he believes that the game is just starting.
The Global Fintech Fest 2021 has been organised by the National Payments Corporation of India (NPCI), Ministry of Electronics and Information Technology (MeitY) along with the Internet and Mobile Association of India (IAMAI), Payments Council of India (PCI) and Fintech Convergence Council (FCC).