World-beater in the making: UPI on the cusp of surpassing Visa’s daily transaction volume

UPI will soon become the world's largest retail payments system surpassing Visa

India’s popular Unified Payments Interface (UPI) is inching closer to surpassing global payments giant Visa’s daily transaction volume, which will make it the largest retail interbank payment settlement platform in the world.

UPI, the world’s largest retail real-time payments system, recorded 644 million transactions on June 1 and 650 million the next day.

Visa processed an average of 639 million daily transactions during FY24. It does not share daily transaction data.

The average daily volume of UPI was 602 million in May, whereas Visa’s average daily transactions in the March quarter – the latest available data – were 674 million.

UPI recorded 630 million daily transactions in the first few days of May but grew to 640-650 million in June.

UPI sees a 5-7 percent month on month growth and a 40 percent annual growth, as internet penetration improves and people embrace digital payments.

Visa reports 10 percent annual growth in transactions. Going by the growth trends, UPI is likely to overtake Visa’s daily average transactions within the next two-three months.

UPI has been set a target of 1 billion transactions a day by the government and the National Payments Corporation of India (NPCI), which runs the instant payment system.

World's biggest payment system

Visa’s competitor Mastercard processes around 450 million transactions a day. Visa and Mastercard transactions are mostly credit, whereas UPI is largely a debit payment instrument.

India accounted for 48.5 percent of real-time payment transactions worldwide, driven by UPI, the Reserve Bank of India's (RBI) FY25 report, released on May 29, said.

The value of UPI transactions in May crossed Rs 25 lakh crore, 12 times that of all card transaction value. In volumes, UPI is miles ahead, facilitating almost 85 percent of all digital payments in the country.

The feat is even more remarkable because card networks such as Visa and Mastercard follow a deferred settlement model while UPI’s is a real-time payment settlement model.

In the deferred settlement model, transactions are bunched up and settled at the end of the day or the following day.

UPI settlement happens in real-time for peer-to-peer (P2P) payments.

Other global payment systems

China’s mobile payments system processes around 2 billion transactions daily, with WeChat Pay and Alipay dominating the payments.

These are closed-loop wallet systems involving the same company (the sender and beneficiary are using the same wallet) and are not complicated interbank payment systems like UPI.

Every single UPI transaction involves three to four banks and five to six financial institutions.

Brazil’s PIX system, which is similar to UPI, processed 64 billion transactions in a year, roughly one-third of what UPI did in FY24.

UPI has grown 15 times in the past five years. Of the 18-19 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.