The Unified Payments Interface (UPI) has revolutionised India’s digital payments landscape. Over the past five years, UPI has recorded unprecedented growth and established its dominance in digital transactions. According to an RBI report, UPI now holds an 83% share of India’s digital payments market. This figure not only highlights UPI’s immense popularity but also reflects how rapidly the Indian economy is embracing digital transformation.
Let’s explore the key factors driving this growth and what this digital revolution means for India’s economy.
What’s Happening?
Since its launch in 2016, the Unified Payments Interface (UPI) has completely transformed India’s digital payments ecosystem. As per RBI data, the total number of UPI transactions in India was 3.75 billion in 2018, which has skyrocketed to 172.21 billion in 2024.
Similarly, the total value of UPI transactions has surged from Rs 5.86 lakh crore in 2018 to Rs 246.83 lakh crore in 2024. Over the past five years, the number of transactions has grown at a CAGR of 89.3%, while the transaction value has witnessed an 86.5% CAGR.
This growth is not just a testament to UPI’s simplicity and security but also a significant step toward realising the vision of a ‘Digital India.’
Factors Behind UPI’s Success
Several factors have contributed to UPI’s phenomenal success.
- Interoperability: UPI allows seamless transactions across different banks and wallets.
- Security: Transactions are highly secure, incorporating multi-factor authentication.
- Financial Inclusion: UPI has enabled even small merchants and street vendors to accept digital payments, boosting the shift toward a cashless economy.
- User Convenience: Features like real-time payments, QR codes, mobile number-based transactions, and Virtual Payment Addresses (VPA) have made digital payments effortless.
Additionally, the government and RBI have actively promoted UPI. Measures such as zero transaction fees and new features like UPI 123Pay, UPI Lite, and UPI Circle have further enhanced its user-friendline
The Rapid Adoption of Digital Payments in India
The Reserve Bank of India’s Digital Payments Index (DPI) has been rising rapidly. By September 2024, the index reached 465.33, up from 445.5 in March 2024, indicating the growing adoption of digital transactions in the country.
According to the RBI, this growth is driven primarily by improvements in payment infrastructure and transaction efficiency. Launched in January 2021, the DPI measures the expansion of digital payments, with March 2018 as the base year (set at 100 points).
What’s in It for Investors?
UPI’s success has opened new opportunities for investors. Fintech companies operating on the UPI platform are experiencing rapid growth. For instance, CRED has become the first fintech company to gain access to RBI’s Central Bank Digital Currency (CBDC) project, paving the way for new innovations.
Among publicly listed players in India, apart from banks, Paytm and MobiKwik are already on the stock exchanges, while PhonePe, which holds the largest share in the UPI market, is preparing for an IPO.
What’s Next?
The future of UPI looks even brighter. The RBI and the Indian government are working towards expanding UPI’s reach globally, and it has already been launched in multiple countries, including Bhutan, France, Mauritius, Nepal, Singapore, Sri Lanka, and the UAE.
Moreover, as per RBI’s Payments System Report, by the end of 2024, digital payments accounted for 83% of total transactions in India. In contrast, traditional payment methods such as RTGS, NEFT, IMPS, credit cards, and debit cards, which made up 66% of transactions in 2019, have seen their share decline to just 17% in 2024.
*This article is for informational purposes only. This is not investment advice.
*Disclaimer: Teji Mandi Disclaimer
