UPI has replaced much of the currency in circulation: SBI
What's the story
Ever since its introduction in 2016, the Unified Payment Interface (UPI) has grown in popularity. Its meteoric rise has made India one of the leaders in digital payments across the world. Now, the State Bank of India (SBI), in its latest report, has said that much of the currency notes in circulation have been effectively replaced by UPI.
Context
Why does this story matter?
India was once a primarily cash-based economy. However, the advent and rise of UPI have changed that. The decline in cash usage in India has coincided with the country's rise as a digital payment leader. According to recent data published by MyGovIndia, India topped the world in real-time digital payments in 2022. The usage of UPI is expected to rise further.
Replacement
Cash usage has declined in India considerably
SBI's report affirms what several other reports have shown already. According to the Economic Survey 2023, UPI accounted for 52% of all digital transactions in FY22. It was only 17% in FY19. Similarly, according to the FSI Global Payments Report 2023, cash usage in POS transaction value declined from 71% in 2019 to 27% in 2022. It is expected to decline further.
Contribution
Semi-urban areas accounted for one-third of UPI transactions
Per the SBI report, semi-urban areas accounted for 35% of UPI transactions in value/volume. It was followed by rural areas with 25% and urban areas with 20%. Metros accounted for 20%. This is contrary to the popular conception that metros and urban areas contribute the most to UPI transactions. UPI has emerged as an effective replacement for cash in rural economies too.
States
Top 15 states accounted for 90% of transactions
Out of all UPI transactions, 90% came from the top 15 states, including Andhra Pradesh, Maharashtra, Telangana, Karnataka, Uttar Pradesh, Rajasthan, Tamil Nadu, Bihar, West Bengal, Odisha, Kerala, Madhya Pradesh, Gujarat, Assam, and Haryana. Most of the transactions in these states ranged between Rs. 1,600-2000. According to the report, the majority of transactions in the person-to-person and person-to-merchant segments were above Rs. 2,000.
Future
Government plans to take UPI to other countries
The Indian government has major plans to increase the adoption of UPI. Not just in India, but around the world. The National Payments Corporation of India (NPCI) is in discussions with Gulf countries, including Bahrain and Saudi Arabia, to establish a UPI-based cross-border payment system. The Japanese have also shown interest in boarding the UPI train.