The daily unified payments interface (UPI) transactions crossed 700 million for the first time on August 2.
The government has set a billion (100 crore) transactions a day goal for UPI, which seems closer with the platform set to reach the target sometime next year with the current rate of growth.
Despite the growth slowing down compared to the past 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. During August last year, UPI was registering around 500 million transactions.
MDR demand gets more support
“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 merchant discount rate (MDR) on merchant payments. The ecosystem needs to make around Rs 15,000 crore every year for investments,” said a senior banker who works on the UPI platform.
Over the last year or so, fintech companies and the payment companies associations have been requesting the government to impose a marginal MDR for large merchants and high-value merchant transactions.
While the government reduced the subsidies for UPI from around Rs 4,500 crore in FY 24 to Rs 1,500 crore in FY 25, it refused to accept the MDR demand of the ecosystem. Recently, the Reserve Bank of India (RBI) also voiced support for the MDR demand of payment companies.
The lack of monetisation and lower subsidies likely forced ICICI Bank to charge payment aggregators for facilitating UPI payments.
Organic growth is still strong
During the last month, UPI recorded around 19.5 billion transactions worth over Rs 25 lakh crore. This translates into around 650 million transactions in a day on average and is worth around Rs 83,000 crore daily.
Barring two days, UPI crossed 600 million transactions in a day during July. The platform tends to process more transactions during the first few days of the month, with the transactions tapering by the middle of the month.
The mobile payments platform run by the National Payments Corporation of India (NPCI) is the country’s most popular digital payments platform, with almost 85 percent of such transactions being facilitated through it.
UPI recorded 630 million daily transactions in the first few days of May but grew to 640-650 million in June.
The platform sees 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 digital payments.
World beater in the making
Meanwhile, UPI is on the cusp of surpassing Visa’s daily transaction volume, which will make it the largest retail interbank payment settlement platform in the world.
It is 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 grown 15 times in the past five years. 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. They were only 40 percent in January 2022, pointing to a shift in UPI use from person-to-person to merchants.
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