Statsguru: Six charts explain the rise of UPI transaction volumes

The recent uproar over potential charges for using the Unified Payment Interface (UPI) can perhaps be seen as a measure of its success.The recent Reserve Bank of India paper also examined charges for other instruments, such as credit and debit cards, which did not lead to a similar level of popular debate. The UPI platform has left these instruments far behind in enabling digital transactions, accounting for over 60 per cent of transactions in 2021-22 compared to less than 6 per cent in 2017-18. Card transactions have seen their use erode to a single-digit share over the same period (chart 1).

The trend only shows signs of strengthening. While the volume of UPI transactions doubled year-on-year as of July, the value of transactions went up by over 75 per cent, and new banks are being added every month (charts 2,3,4).

The National Payments Corporation of India (NPCI), which runs the UPI platform, provides data on amounts transferred by value. Merchant payments accounted for around 52 per cent of the total amount transferred in July 2022 with transactions valued at less than Rs 500. Peer-to-peer transactions accounted for over 80 per cent of the total amount transferred in transactions of over Rs 2,000 (chart 5).

Smaller transactions dominate the system. Nearly seven out of every 10 transactions initiated via UPI are for less than Rs 500 (chart 6).

However, rising digitisation may pose its own challenges. Only 57.1 per cent of men and 33.3 per cent of women have ever used the internet in India, according to data from the fifth round of the National Family Health Survey (NFHS-5) that the government conducted in 2019-21. The situation is worse in rural India where only 48.7 per cent of men and 24.6 per cent of women have had exposure to the internet.

This may be one reason for the persistence of cash in the economy, equivalent to 13.7 per cent of gross domestic product as of 2021-22 compared to 12.1 per cent in 2015-16 before demonetisation.