UPI to reach 1 billion transactions per day in FY28: PwC report

UPI transactions have continued to register significant growth, with a 57% and 44% increase in transaction volume and value respectively, according to the PwC India report titled, “The Indian Payments Handbook – 2024-29” These figures align closely with projections for the 2023-28 period. UPI has solidified its position as a dominant payment rail in India’s retail digital payments landscape, accounting for over 75% of the total transaction volume in FY 2023. This trend continued into FY 2023-24, where the transaction volume reached 131.12 billion, and the transaction value reached INR 199.9 trillion.

Considering the current growth trend, market penetration of UPI use cases, global expansion of UPI, market dynamics and technological advancements, it’s projected that the daily transaction volume may reach 1 billion during FY 2027-28. This is a shift from the earlier forecast of achieving this target in 2026-27. Furthermore, the daily transactions are expected to increase to 1.4 billion by the end of FY 2028-29.

Securing UPI transactions:

The RBI has recently begun exploring alternatives to traditional PINs and passwords for transaction authentication, considering the use of biometric data, such as fingerprints.

This proposed system would enable users to authenticate UPI payments through fingerprint recognition on android devices and face ID on iOS, effectively phasing out the current UPI PIN. To ensure a smooth transition, initially both PIN and biometric authentication methods will be offered simultaneously, providing users with flexible options for transaction verification. This initiative, which started over three years ago, has gained momentum amid the RBI’s growing concerns over UPI scams linked to PIN-related fraud.

The introduction of biometric and face ID authentication is expected to enhance transaction security, reduce fraud, and improve the overall user experience, thereby encouraging wider adoption of UPI payments.

However, it is crucial to address potential privacy risks and the misuse of biometric data. The rollout should be gradual, in alignment with the Digital Personal Data Protection Act, 2023, to mitigate data misuse risks. The lessons learned from this implementation will also serve as a foundation for future integrations of similar innovations into the UPI system.

Reassessing the UPI ecosystem architecture:

As UPI continues to expand, it is crucial for stakeholders to reassess their architecture within the UPI ecosystem. The entry of new TPAPs and the emergence of innovative use cases, such as UPI integration with credit cards and credit lines, are likely to increase processing demands on core systems.

To effectively manage the anticipated spikes in transaction volume, exploring the deployment of UPI infrastructure on cloud platforms for transaction processing is essential. Leveraging cloud technology can enhance scalability, flexibility and reliability, ensuring that the UPI ecosystem can accommodate future growth while maintaining optimal performance.

By proactively addressing these challenges, stakeholders can strengthen the UPI framework and support its ongoing evolution in the digital payments landscape.

Gradual enabling of interchange, especially for credit cards and credit line will provide the necessary incentives to the financial system. Lenders will be able to reduce the pricing and make small-ticket loans affordable for segments witnessing the maximum demand.

Credit cards linked to UPI have emerged as the dominant payment method, with users spending over INR 22,000 per month. On average, credit card transactions via UPI occur 21 times per month, which is four times more frequent than traditional physical credit cards.² Credit cards on UPI have propelled the overall RuPay transaction volume and values in the past year, with the RuPay credit cards market share seeing a growth of almost 233%³ during FY 2023-24.

This can be attributed to the implementation of UPI on credit cards by leading issuers. The volume and value of transactions including RuPay cards in force are expected to increase over the next few years.

The average transaction value for RuPay credit cards on UPI stands at INR 1,125 which is significantly lower than overall credit card transactions which hovers around INR 5,100 and almost double of UPI P2M transactions which stand at INR 650. This shows that credit cards on UPI transactions have created their own place in this market.

Considering the payment mode is currently being used by early adopters, credit cards on UPI seems promising. UPI's ease of use and the technology already being well penetrated in the market at both ends of the spectrum (i.e. consumers and merchants) is attributed to the growth seen by this particular use case.

Global expansion of UPI

There is significant progress in the global expansion of the UPI system, and it will continue growing in a resolute manner in the coming years. The strategic partnership of RBI and NPCI International Payments with international organisations have enabled the integration of UPI in numerous countries, thereby enhancing the efficiency and ease of cross-border transactions.

As the Government of India persists in its efforts to collaborate with various nations for the global expansion of UPI, it’s imperative for other stakeholders in the ecosystem to concentrate on expeditious implementation, seamless technical integration, robust security protocols and interoperability. Additionally, raising user awareness and adapting to local preferences are crucial for boosting UPI acceptance in these countries.

UPI One World

A prepaid wallet was tailored for foreign visitors from the G20 countries allowing them to experience the ease of P2M payments of UPI, garnering everyone’s attention during the last G20 summit in India. Post the G20 launch, G20 country residents could use UPI. This is an important development for Indian tourism sector which is expected to contribute 4 USD 250 billion to the country’s GDP by 2030.

Enabling UPI for international visitors will provide much needed convenience as it will obviate the need to locate ATMs in a foreign country. Implementing UPI One World can ensure a smooth and immaculate travel experience.

Credit on UPI

As the country has accepted UPI on all fronts – i.e. consumers, retailers and ecosystem participants – use of cash from smaller to medium expenses has reduced. Now, one ATM transaction is converted into 10+ UPI transactions. This has created a technical debt on the banks and ecosystem participants. One of the ways in which this liability can be leveraged by the asset side of banking is to aggressively penetrate the credit lines of UPI.

Due to UPI, numerous new customers have been linked with the payment ecosystem who were unserved earlier. Transaction data, coupled with basic underwriting checks through participants like account aggregators, can thus prove to be pivotal in bringing about this change.