Category: Banking & Finance

UPI transactions by value touched their highest ever in July at Rs 6.06 lakh crore, surpassing the previous record of Rs 5.47 lakh crore in June and up from Rs 2.91 lakh crore a year ago. Card spending at Rs 1.36 lakh crore in July, on the other hand, was the highest since April and rose from Rs 95,883 crore in the year earlier as the economy recovered.

UPI platforms saw a 109% jump as consumers took to digital payments for daily essentials at local stores as well as premium purchases.

“We are observing that a majority of online payments are through UPI platforms and apps such as Cred,” said Riyaaz Amlani, chief executive of Impresario Handmade Restaurants, which runs the Social, Smoke House Deli and Salt Water Café chains. Amlani said UPI adoption is rising as average order value at outlets has increased 20% after the pandemic’s second wave.

While the economy shows signs of recovery, discretionary spending using cards has grown but couldn’t match UPI, executives said.

Banks, Retailers Note Trend

Digital payments made on wallets and UPI platforms by volume rose to about 3.25 billion in July, from 1.5 billion a year ago. The number of payments using cards was 520 million, compared with 450 million a year earlier.

Le Marche Retail chief executive Amit Dutta said the premium grocery chain has observed the trend within stores as well as in-home transactions. “UPI payments are showing increased traction in the past year, driven by convenience and the transactions being contactless, compared to card swiping, where contact points are higher,” he said. Consumers not previously comfortable with UPI payments have overcome their initial hesitation, Dutta said.

Banks executives said card payments are also growing, though UPI platforms are growing faster.

“UPI growth rate is and will outstrip cards, and it comprises both peer-to-peer and merchants payments,” said Axis Bank head for cards and payments Sanjeev Moghe. “Cards are only for payment to merchants. As long as the cards segment is growing at over 30-40%, it is quite healthy.”

UPI, payment platforms and wallets account for 10-15% of sales at leading electronics retail chain Vijay Sales, said its director Nilesh Gupta, up from almost nil just a year ago. “Consumers are even buying high-ticket items through such modes. These platforms often offer cashback incentives to entice customers,” he said.

Digital Adoption

The government and the RBI have been focusing on facilitating digital adoption by enhancing acceptance infrastructure and introducing innovative payment options to deepen the reach of payment systems.

“UPI transactions have moved the needle substantially in the past 12-15 months for neighbourhood grocery stores, riding on three reasons — convenience, instant credit and contactless transactions,” said Prem Kumar, founder of Ratan Tata-backed retail tech company SnapBizz, which devises technology for over 30,000 kirana stores and does business transactions of over $1 billion a year.

RBI said in its latest annual report that efforts were also directed toward ensuring smooth functioning of all payment systems despite disruptions in movement and access to infrastructure caused by the Covid-19 lockdown, with varying intensity and duration across various locations in the country.

Remittances also contributed a chunk of UPI volume. The platform is expected to see more traction once all banks develop systems to support inward remittances on UPI platform, said Emil Ruban, country manager India at Ria Money Transfer. “Many banks are yet to develop cross-border money transfer facilities,” he said.

A Euromonitor report said the trend is expected to continue, with increasing acceptance of UPI. “A large number of consumers started using UPI transactions for daily shopping activities especially at local retail stores, with the outbreak of the pandemic,” said Euromonitor consultant Vishnu Vardhan.