Worldline releases its India Digital Payments Report for H1 2023

• UPI a huge success as the number of transactions reached 9.3 billion in June 2023 from 151 million in January 2018
• Surge in P2M transactions as it accounted for 57.5% of all UPI transactions in June 2023
• Mobile phones continue to drive digital transactions as the number of mobile transactions in H1’23 was 52.15 billion compared to 33.55 billion in H1’22

The report reveals that the number of UPI transactions in January 2018 which was 151 million reached 9.3 billion in June 2023, primarily driven by the growth in Person-to-Merchant (P2M) transactions. In January 2022, P2M transactions accounted for 40.3% of all UPI transactions compared to 57.5% in June 2023 and this percentage is likely expected to keep growing.

Another indicator that prognosticates the future of UPI growth, particularly UPI P2M transactions is the average ticket size (ATS). The ATS for UPI P2M transactions which was INR 885 in January 2022 has reduced to INR 653 in June 2023 indicating that UPI is now being increasingly used for micro transactions, indicating a further entrenchment of UPI.

Ramesh Narasimhan, Chief Executive Officer - India Worldline commented: “Every passing month serves as a testament to the rapid adoption of digital payments. Looking back at the first half of 2023, I find myself even more optimistic about the payment trends unfolding in India; the impressive performance of UPI, the surge in credit card usage, the jump in mobile payments volume, and the uptick in small ticket size of P2M transactions.

All this indicates that broad swathes of the country, rural and urban, are embracing digital payments. The allure of digital payments beckons consumers and merchants alike, evolving it into an indispensable facet. As the payments landscape of India continues to grow, we at Worldline are enabling secure, hassle-free, and timely payments to suit our customers' evolving needs”.

Worldline India Insights

The report reveals that in H1 2023, frequently visited In-Store merchant categories such as grocery stores, restaurants, service stations, clothing stores, government services, pharmacies, and hospitals accounted for around 65% in terms of volume and nearly 50% of the total transaction value. In the online space, e-commerce, gaming, utilities, government, and financial services amounted to more than 80% of the total transaction volume and contributed to more than 75% of the total transaction value.

The top 10 states and UT with the highest number of transactions at physical touch points in 2022 for Worldline India were Maharashtra, Kerala, Tamil Nadu, Karnataka, Delhi, Telangana, Uttar Pradesh, Gujarat, Andhra Pradesh and West Bengal.
The report further deep dives into various payment instruments to understand the growth of the digital payments ecosystem in India.

Payments Acceptance Infrastructure

Payments acceptance infrastructure channels saw a surge between January 2022 and June 2023. PoS terminals grew by 44% to 8.09 million while BQRs grew by 21% to 5.69. UPI QRs grew by 79% (already on a large base) to 272 million. The RBI’s PIDF scheme has also helped the growth in PoS terminals while UPI QR growth has been driven by the private companies dominating UPI acceptance. This growth in UPI QRs is also reflected in the growth in UPI transactions as well as how it has had an impact on other forms of payment.

UPI

UPI continues to be the dominant payment channel in India dwarfing other payment options. UPI transaction volume has experienced a major upswing increasing from 4.6 billion transactions in January 2022 to 9.3 billion in June 2023. Correspondingly, the transaction value has exhibited a parallel upward trajectory. It increased from INR 8.3 trillion in January 2022 to nearly doubling to an impressive 14.7 trillion in June 2023. A key driver for this growth has been the near-ubiquitous acceptance of UPI for both personal and payment transactions from the user/buyer standpoint as well as a high acceptance by merchants. Also, there has been greater penetration of UPI in rural India.

When comparing H1’23 to H1’22, the volume of UPI transactions increased by 62% from 31.95 billion to 51.91 billion. When the value of transactions is compared, it increased by 47% from INR 56.59 trillion to INR 83.17 trillion. However, the most interesting number is the average ticket size which reduced by 10% from INR 1774 to INR 1604. This is actually a good thing suggesting a deeper embedding of UPI by being used for smaller or micro transactions and this dip has been primarily driven by the growth in person-to-merchant (P2M) transactions.

P2P and P2M Transactions: UPI transactions consist of person-to-person (P2P) and person-to-merchant (P2M) transactions. While both have clocked good growth numbers, the P2M transactions growth is truly impressive. P2P transactions grew from 18.62 billion transactions in H1’22 to 22.75 billion in H1’23; a 22% increase. During the same period, the value of P2P transactions grew from INR 45.52 trillion to INR 63.99, a 41% increase. By contrast, during the same period, P2M transactions volume grew from 13.33 billion to 29.15 billion, a 119% increase while the value grew from INR 11.6 trillion to INR 19.18 trillion, a 72% increase. During the same period, P2M transactions grew from 41% of all UPI transactions to 56%.

While some of this growth in P2M transactions can be attributed to zero transaction fees imposed on merchants, it indicates the depth of acceptance of this payment mechanism from both buyers and particularly the sellers; beyond low fees, merchants are also looking for security, timely payments among other things and UPI delivers here. The other fact is that with the dominance of P2M transactions, UPI is going to become even more entrenched with the population and growth will continue at this rapid pace and the P2M percentage, at current trends, will likely reach 75% of all UPI transactions by 2025.

Average Ticket Size: The average ticket size (ATS) of all UPI transactions in H1’22 was INR 1774 compared to INR 1604 in H1’23, a 10% decrease. When P2P transactions are considered, during the same period, the ATS grew from INR 2442 to INR 2812, a 15% increase. That said, the reduction in overall ATS has been driven by the reduction of ATS ticket sizes of P2M transactions. During the same period, the ATS of P2M transactions fell from INR 839 to INR 659, a 21% reduction. Since the future of UPI is going to be P2M transactions, this is a good trend. It indicates that UPI is increasingly being used for micro transactions ensuring a greater stickiness for the product.

Top UPI apps, Remitter and Beneficiary banks: Three UPI apps are dominant in terms of volume and value; PhonePe, Google Pay, and Paytm. In terms of transaction volume, in June 2023, the 3 apps accounted for 95.68% of all transactions compared to 94.55% a year before. In terms of transaction value, the 3 accounted for 93.65% in June 2023 compared to 93.38% in June 2022. The dominance is likely a mixture of early mover advantage as well as features offered in the apps. The top 5 remitter and beneficiary banks are being driven by PhonePe and Google Pay; Paytm rides on its bank rails while the other 2 use the rails of other banks.

Credit, Debit and Prepaid Cards

The total number of cards in circulation has shown a modest growth over the last 18 months. In June 2023, the total number of cards was 1376 billion, a 9% YoY increase. In June 2023, the number of credit cards was 88.68 million, 975.8 million debit cards and 312.1 prepaid cards; this corresponds to a YoY growth of 13%, 6% and 18% respectively. The top 5 issuers of credit cards are HDFC, SBI, ICICI, Axis and Kotak respectively and the top 5 issuers of debit cards are SBI, Bank of Baroda, Canara Bank, HDFC and Bank of India.

The contrast between private sector banks dominating credit card issuance and public sector banks dominating debit card issuance is clear suggesting the risk appetite among the former is higher while the latter is focused on providing accounts to a larger section of the population including the unbanked. For credit cards, 70.1% were issued by private sector banks and 24.1% by private sector banks while 67.4% of debit cards were issued by public sector banks and 22.6% by private sector banks. The balance was issued by payment banks, small finance banks and foreign banks.

In contrast to card transactions, the volume of card transactions in H1’23 was 3.64 billion, a fall of 8.9% from H1’22. The fall was driven primarily by debit cards followed by prepaid cards. In contrast, credit card transactions saw an upswing. Debit card transactions in H1’23 were 1.379 billion, a huge 28% drop off from H1’22 while prepaid card transactions in H1’23 were 0.711 billion, a drop of 9.2% from H1’22. Meanwhile, credit card transactions in H1’23 were 1.550 billion, a significant increase of 19.6% when compared to H1’22.

This same pattern is repeated in the value of transactions and it appears debit card transactions are/were a casualty of the upswing in UPI transactions while prepaid could be a mixture of UPI transactions as well as the guidelines on prepaid cards issued by the RBI in June 2022; prepaid card transactions have seen a steady decline in both volume and value since then. Credit card transactions which are usually used to make payments of higher value transactions such as for white goods, travel etc have not been affected.

The value of card transactions in H1’23 was INR 11.35 trillion, an increase of 11.7% from H1’22. This growth was largely supported by credit cards. Credit card transaction value in H1’23 was INR 7.94 trillion, a strong rise of 30.5% from H1’22 while, during the same period, debit cards transaction value was INR 3.17 trillion, a fall of 14.8% while prepaid cards were INR 325 billion, a fall of 32.8%. The average ticket size (ATS) tells an interesting story, particularly for debit cards.

The average ticket size for all cards was INR 3117, a 22.6% YoY increase. This growth was primarily driven by debit card ATS growth. While credit cards ATS in H1’23 was INR 5122, a 9.1% growth and prepaid cards ATS was INR 325, a 26% decrease, debit cards ATS was INR 2303 in H1’23, a strong 18.3% growth. This growth in debit card ATS likely suggests that while debit card transaction volume fell, there was still a significant population that used debit cards for their purchases and that ensured that transaction value did not fall parallelly.

Mobile Payments

Mobile payments, which are transactions done using mobile phone apps, have seen solid growth. A significant number of these transactions are UPI-based but could be a whole host of payments using bank accounts etc. The number of mobile transactions in H1’23 was 52.15 billion compared to 33.55 billion in H1’22, a 55.4% while the value of mobile transactions in H1’23 was INR 132 trillion compared to INR 95.32 trillion in H1’22, a 38.9% increase. Another comparison shows the real growth; between January 2022 and June 2023, the volume was up 77% while the value was up 58%.

The ATS of mobile app transactions in H1’23 was INR 2538, a 10.6% reduction compared to H1’22. What this shows is how Indians have taken to their mobile phones to make payments for multiple things using multiple channels. The growth in this also indicates how stable this method of payment will be and how it will continue to power the future of payments in India. The ATS fall, like UPI, shows this will be the basis for sustained resilience.

Net Banking

While Net Banking (NB) is traditionally thought of to be where one pays for their goods and services, it also includes payments made by corporates for taxes among many other things explaining the very high numbers. In H1’23, the volume of NB transactions was 2.13 billion, a 1.4% increase from H1’22 (2.10 billion). In terms of value, NB transactions in H1’23 amounted to INR 468.8 trillion compared to INR 442.4 trillion, a 5.9% increase.

In terms of ATS, it was a massive INR 219974 in H1’23 compared to INR 210495 a year before. NB, given its usage, will continue its upward trajectory but the percentage growth will be small just given the massive base.

Electronic Toll Collection

Electronic Toll Collection (ETC) has changed how we pay for tolls on the country’s roads and now increasingly at parking plazas among other use cases. Drivers across the country can testify how easier it has made driving on roads and this steady adoption is reflected in the numbers. To start with, the number of tags issued has grown from 45.97 million in January 2022 to 71.92 million in June 2023, a 56.5% growth. In terms of volume, transactions in H1’23 were 1.85 billion compared to 1.57 billion in H1’22, a 17.6% growth while the value of ETC transactions in H1’23 was INR 303.4 billion, a 25.3% increase when compared to H1’22 (INR 242.2 billion).

Given that ETC tags are a mandate, this number will continue to grow steadily and as new use cases come online, that steady increase may take on a steeper incline.

Note to editors:
These figures reflect general market trends and should not be taken as a proxy for Worldline‘s market share or company earnings. The figures primarily reflect transactions undertaken from January to June 2023 available in public databases during this period.

About Worldline

Worldline [Euronext: WLN] helps businesses of all shapes and sizes to accelerate their growth journey – quickly, simply, and securely. With advanced payments technology, local expertise and solutions customised for hundreds of markets and industries, Worldline powers the growth of over one million businesses around the world. Worldline generated 4.4 billion euros in revenue in 2022.