Digital payments see rapid growth in March-September, says RBI

The index, launched by RBI in Jan, has five broad parameters that enable the measurement of deepening and penetration of digital payments in the country over different time periods

The Reserve Bank of India’s (RBI) digital payments index (DPI), which was launched in January 2021 to indicate the extent of digitisation of payments across the country, shows that the index for September 2021 stood at 304.06 against 270.59 in March. This indicates the rapid adoption and deepening of digital payments across the country.

In a statement, the RBI said, “The RBI-DPI Index continues to demonstrate significant growth in adoption and deepening of digital payments across the country.”

In March 2019, the index stood at 153.47 and by September 2019, it rose to 173.49, followed by 207.94 in March 2020, 217.74 in September 2020, and 270.59 in March 2021.

The RBI said the index will be published on a semi-annual basis with a lag of four months. The RBI-DPI has been constructed with March 2018 as the base period, that is, DPI score for March 2018 is set at 100.

The DPI index comprises five broad parameters that enable us to know the penetration of digital payments in the country over different time periods.

The parameters include payment enablers, with a weightage of 25 per cent in the index, followed by demand-side and supply-side payment infrastructure factors, with a weightage of 10 per cent each. There is also the payment performance, with 45 per cent weightage, and consumer centricity, with 5 per cent weightage. Each of the parameters has sub-parameters, which, in turn, consist of various measurable indicators.

Experts have pointed out that Covid-19 has advanced digital payments adoption in the country by 5-10 years.

According to a report by Jeffries, India, on an annual basis, sees over $2 trillion in digital payments on a combination of banking apps, cards, unified payments interface (UPI), mobile wallets and government-driven direct-benefit transfers.

UPI payments have seen the highest ramp-up and constitute $1 trillion of annualised payments (as of August 2021), followed by immediate payments services (IMPS).

While mobile wallets are growing, their transaction market share is lower, annualising at $29 billion. Credit and debit cards at point of sale (PoS) machines are annualising at $230 billion. Of course, the legacy online banking platform national electronic fund transfer (NEFT) still drives a dominating $3.6 trillion in annualised payments.

Experts have pointed out that a combination of initiatives by the government and the regulator has led to rapid replacement of cash transactions in favour of digital. These include the JAM trinity (Jan Dhan Bank Accounts), Aadhaar-based identification and mobile penetration, launch of platforms like UPI, mobile banking and payment gateways, among others.

In 2021-22 (FY22) so far, UPI, the most popular payments platform in the country, processed more than 31 billion transactions, surpassing the transactions processed in 2020-21 (FY21). In FY21, the platform processed around 22 billion transactions.

In CY21, UPI had processed more than 38 billion transactions, amounting to Rs 71.59 trillion.

The National Payments Corporation of India, the umbrella organisation of digital payments in the country, is aiming to achieve 1 billion transactions per day on the UPI platform in the next 3-5 years.