UPI crosses 20 billion monthly transaction milestone in August, valued near Rs 25 lakh crore

Earlier during the month, the daily UPI transaction had crossed the 700 million mark for the first time on August 2, and a few days later, the platform processed 721 million transactions.

The government has set a target of one billion (100 crore) transactions a day for UPI, which seems closer, with the platform set to achieve it sometime next year, at the current rate of growth.

Despite the growth slowing down compared to recent years, the number of daily transactions has doubled over the last two years. In August 2023, UPI was registering around 350 million transactions a day, and during August last year, UPI saw around 500 million daily transactions.

MDR Demand Gets More Support

The new records for UPI come amidst increasing calls for a merchant discount rate (MDR) on merchant payments, which is the payment commission merchants pay to payment entities, including banks.

“For the next phase of growth and to reach a billion transactions by next year, the ecosystem partners should have a viable business model, including MDR on merchant payments. The ecosystem needs to make around Rs 15,000 crore every year for investments,” one senior banker who works on the UPI platform had told Moneycontrol recently.

Over the last year or so, fintech and payment companies' associations have been requesting Centre to impose a marginal MDR for large merchants and high-value merchant transactions.

While the government has reduced subsidies for UPI from around Rs 4,500 crore in FY24 to Rs 1,500 crore in FY25, it has not accepted the MDR demand from the ecosystem. Recently, the Reserve Bank of India (RBI) too has voiced support for the demand of MDR on payment companies.

The lack of monetisation and lower subsidies has likely forced ICICI Bank to charge payment aggregators for facilitating UPI payments. A few other banks also have been charging payment companies various fees.

Organic Growth is Still Strong

In July, UPI recorded around 19.5 billion transactions, worth over Rs 25 lakh crore. In August, the platform saw around 645 million transactions in a day on average, worth around Rs 80,000 crore daily.

Barring a single day, UPI managed to cross 600 million daily transactions all throughout August. The platform usually processes more transactions during the first few days of the month, which begin to taper by the middle of the month.

The mobile payments platform run by the NPCI is India's most widely used digital payments gateway, with almost 85 percent of retail digital transactions being facilitated through it.

The platform has been clocking a 5-7 percent month-on-month growth and around 40 percent annual growth as internet penetration improves, and as more people and merchants embrace the digital payment mode.

World Leader in the Making

The UPI is also on the cusp of surpassing Visa’s daily transaction volume, which will make it the largest retail inter-bank payment settlement platform in the world.

It is already the world’s largest retail real-time payments system, since card networks such as Visa and Mastercard follow a deferred settlement model compared to UPI’s real-time payment settlement model.

UPI has seen a 15-fold growth in the past five years, and out of the 19 billion UPI transactions every month, almost two-thirds are merchant transactions.

Merchant payments have grown rapidly and now account for around 62 percent of all UPI transactions, compared to only 40 percent in January 2022, underscoring the shift in UPI use from person-to-person to merchants.