According to the latest data released by the National Payments Corporation of India (NPCI), which operates UPI, the payment system recorded 3.24 billion transactions worth INR 6.06 lakh crore in June 2023, registering a growth of 10.6% in volume and 11.5% in value compared to May 2023. This is the highest monthly transaction volume and value recorded by UPI since its launch in 2016.
key factors that have contributed to the phenomenal growth of UPI are:
- Wide acceptance and convenience: UPI is accepted by over 30 million merchants across various sectors such as e-commerce, food delivery, travel, education, healthcare, etc. UPI offers a simple and secure way of making payments using a virtual payment address (VPA) or a QR code, without the need to share bank details or card information.
- Innovation and interoperability: UPI enables innovation and interoperability among various players in the digital payments ecosystem, such as banks, fintechs, payment service providers, etc. UPI offers various features and use cases such as peer-to-peer (P2P) transfers, peer-to-merchant (P2M) payments, bill payments, recharges, subscriptions, donations, etc. UPI also supports multiple languages and voice-based payments.
- Regulatory support and incentives: UPI has also benefited from various incentives and rewards offered by the government and the private players to encourage its adoption among users and merchants.
- COVID-19 impact: The COVID-19 pandemic has created a behavioral shift among consumers and businesses towards digital payments, as they seek to avoid physical contact and maintain social distancing. UPI has emerged as a safe and convenient option for making payments during the crisis, as it does not require any physical exchange of cash or cards.
As per a report by BCG and PhonePe Pulse released in June 20231, digital payments in India are projected to reach $10 trillion by 2026, with UPI accounting for 90% of the total transaction volume over the next five years. The report also predicts that UPI adoption will surge from 35% in FY 21 to 75% in the next five years, driven by factors such as simplified customer onboarding, continued push for consumer awareness, expanding merchant acceptance, merchants getting greater access to credit, infrastructure upgrades and the setting up of a financial services marketplace.
UPI is undoubtedly one of the most successful and transformative innovations in the Indian digital payments space, which has enabled millions of Indians to access fast, easy and affordable financial services. With its continuous evolution and expansion, UPI is poised to become the backbone of India’s digital economy in the coming years.