UPI replacing cash in payments ecosystem: Macquarie report

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According to a recently published report by Macquarie Research, almost 81% of the transactions in Unified Payments Interface (UPI) have been from Peer-to-Peer (P2P). This suggests that the platform is replacing cash in the payments ecosystem and leading to more digitization of the economy. The report also added that, around 19% of the transactions are Peer to Merchant (P2M), which accounts for nearly Rs 9.96 trillion, surpassing both credit and debit card Point of Sales (PoS) transaction values.

The report added that cards are generally used for transactions with higher ticket sizes as compared to UPI, which is used to make small-ticket purchases. While P2M transactions form 45% of the total UPI transactions by volume, in terms of value they constitute just 19%, with an average ticket size of Rs.700 for FY 21.

Credit card’s average transaction size at (PoS) is around Rs 3,600, while average spends per card in a month is around Rs 11,000- 12,000. The average ticket size in the P2P segment has been Rs 2,700, the report said.

UPI accounted for 10% of overall retail payments

In FY 21, UPI made up for 10% of overall retail payments, which was excluding Real Time Gross Settlement (RTGS). This increased at a Compounded Annual Growth Rate (CAGR) of 400% between FY 17 and FY 21, the report said. Over a few years ago, the platform’s share in the overall retail payments space was only 2%.

Though UPI was a late entrant in the retail payments space, its FY 21 annual throughput value was at Rs 41 trillion, which was almost three times that of the combined usage of debit and credit card at Point of Sales(PoS) transactions, and almost 20 times that of Prepaid Payments Instruments, It said.

The shares of PPIs (wallets, pre-paid cards) have remained insignificant (sub 0.5% in overall retail payments), the research report added.

It further added that UPI clocked the highest number of transactions in terms of volume during FY 21. The platform recorded 22.3 billion transactions in terms of volume in FY 21. While the volume of transactions declined in the initial months of the pandemic, it picked up momentum once the economy reopened and touched new heights every month. This was mainly due to interoperability, open-source platform, ease of use, and zero merchant discount rates, the report added.

In July 2021, UPI processed a record 3.24 billion transactions, which was up by 15.7% from June, when it processed 2.8 billion transactions. In terms of value, the platform processed 6.6 trillion worth of transactions in July, which was 10.76% higher as compared to June, which was an all-time high.