With UPI transactions setting record highs every month as digital payments adoption deepens in the country, it is quite reasonable to expect this flagship payments platform to process 1 billion transactions a day. While this milestone can be achieved in 10 years’ time without any effort whatsoever, the National Payments Corporation of India (NPCI), the umbrella organisation of digital payments in the country is aiming to achieve the 1 billion transactions per day milestone on UPI in the next 3 – 5 years, said Dilip Asbe, MD&CEO, NPCI.
“If we don’t do anything, we will achieve this target in the next ten years. But we should aim to do it in the next 3 – 5 years’ time and this is where the whole ecosystem has to rally behind it. It is just 5-6x growth than what it is today”, Asbe said in a fireside chat with Amirsh Rau, CEO, Pine Labs, at the India Digital Summit.
"The digital payment potential of a country is related to its population and that way we are blessed with a large population and 1 billion transactions a day is clearly possible in 3 – 5 years’ time," he said.
To achieve this milestone in the next 3-5 years, Asbe said, it is imperative that we follow the three “zero” approaches – zero touch (contactless), zero time (it has to be faster than cash), and zero cost to the customer. If these three “zero” come along then 1 billion transactions a day will happen in the next 3 – 5 years’ time, he said.
In addition to that, it is also important to have a high level of customer education and awareness around digital payments and a robust framework and law enforcement agencies.
UPI had a bumper year, both in value and volume terms, in 2021. In CY21, UPI processed more than 38 billion transactions, amounting to Rs 71.59 trillion. In 2021-22 (FY22) so far, it has processed more than 31 billion transactions, surpassing the transactions processed in 2020-21 (FY21). In FY21, the platform processed around 22 billion transactions. The goal is to touch 40-42 billion transactions in FY22.
According to a report by Jeffries, in FY22, UPI accounts for 50 per cent of retail digital payments in the country and is almost 4.5x of debit and credit card transactions. The report said digital payments are annualising at $2 trillion in India, with UPI being the largest driver, followed by cards and mobile wallets. Experts have suggested that the next phase of growth in UPI will come from the AutoPay feature, which allows recurring payments of up to Rs 5,000.
Speaking on the payment charges, Asbe said, from a customer standpoint, it should be absolutely free. Digital payment is driven by the customer, not by the merchants. The reason why I emphasise zero charges to the customer is because you do not want to create any kind of resistance for them, he said.
Having said that, the merchants also benefit from digital modes of payment because when someone pays through cash, the merchant is competing with the cash the customer has but when it comes to digital payments, the merchant instead is competing with the balance the customer has in his bank account. “So, there is no harm for a merchant to pay some charges. But they have to be reasonable and they have to come down with volumes going up. Till the time we follow the “economies of scale” approach on payment charges, it will help the ecosystem to grow”, Asbe said.
Currently, UPI payments do not attract merchant discount rates (MDRs), while for debit cards, MDR is capped at 0.9 per cent for transactions, except for RuPay debit card, which attracts zero MDR. In the case of credit cards, there is no cap on MDR. For wallets and PPI instruments, the MDR is not regulated and may range from 1.5 to 2.5 per cent, and in some cases, even higher. MDR is the rate at which merchants are charged for accepting payments made via credit cards, debit cards, net banking and digital wallets.
Recently, the Reserve Bank of India (RBI) said it will float a discussion paper, which will cover all aspects of charges in digital payments such as credit cards, debit cards, prepaid payment instruments (cards and wallets) and Unified Payment Interface (UPI), among others, with the main objective of the regulator is to make digital transactions affordable to users and economically remunerative to providers.