UPI boom makes NPCI's other retail payment systems lose momentum
What's the story
The National Payments Corporation of India (NPCI) has witnessed a major shift in the digital payments landscape. While the Unified Payments Interface (UPI) continues to grow at an unprecedented rate, other retail payment modes under NPCI have either stagnated or declined over the past one to two years. This trend highlights a major change in India's digital payment ecosystem.
Transaction trends
IMPS transactions decline amid UPI's rise
The Immediate Payment System (IMPS), an inter-bank fund transfer mechanism, has seen a decline in transactions. From 472 million in November 2022, IMPS transactions fell to 368 million in November 2023. The average monthly transactions have also dropped this year to around 400-450 million from nearly 500 million in 2023. Industry experts believe UPI's user-friendly interface and higher transaction limits have contributed to this shift.
Payment stagnation
FASTag and RuPay cards show similar trends
The national electronic toll collection system, FASTag, has also reached near-saturation with over 95% of toll transactions digitized. Regulatory data shows it processes 350-380 million transactions monthly. Meanwhile, RuPay cards have also seen a decline in transactions from 1.2 billion in FY23 to just 664 million swipes till November this year. Most of these are likely being used via UPI, a feature available to RuPay credit cards.
Market impact
UPI's dominance impacts other payment modes
UPI's growth has also impacted other bank account debit mechanisms such as IMPS, debit cards, and net banking. Vishwas Patel of Infibeam Avenues noted that cheques accounted for 98.8% of all major retail payments in India two decades ago. However, this share has dropped to just 8.5% in 2024 and is expected to fall below 5% next year.
Growth moderation
Digital payments ecosystem shows signs of slowing down
The overall growth of the digital payments ecosystem is slowing down due to a large base effect and market saturation. PayPhi's Jose Thattil said, "UPI has crossed 450 million users and processes more than 20 billion transactions monthly, so a moderation in growth rates is expected due to the high base." He added that deeper inclusion rather than urban smartphone adoption will drive future growth.
User inclusion
Accessibility and confidence key to future growth
Rohan Lakhaiyar of Grant Thornton Bharat said, "The next phase of growth is likely to come from first-time digital users, the elderly, rural households and individuals with lower trust in digital systems—whose primary barriers are accessibility and confidence rather than user-interface design." Rajeev Agrawal, CEO of Innoviti, stressed payment aggregators need to invest in building deeper distribution for these segments.