India’s digital payment landscape is undergoing a dramatic transformation, with the Unified Payments Interface (UPI) leading the charge towards a cashless society. Recent data from the Reserve Bank of India (RBI) reveals a significant shift in consumer behavior, highlighting the growing dominance of digital payments over traditional methods.
During September 2024, UPI-based transactions experienced a remarkable surge, reaching a staggering 78.97 billion in volume – a 52% increase from the same period in 2023. The value of these transactions also witnessed a substantial growth of 40%, rising from Rs 83.16 lakh crore to Rs 116.63 lakh crore in the first six months of the year. This surge in UPI usage is directly linked to its widespread adoption and convenience, facilitating seamless and cost-effective transactions across the country.
In contrast to the booming UPI sector, debit card transactions saw a decline of almost 8% in September, falling from nearly Rs 43,350 crore in August to approximately Rs 39,920 crore. This downturn suggests a gradual shift away from debit card payments, likely influenced by the increasing accessibility and user-friendliness of digital platforms like UPI.
While debit card usage is experiencing a decline, credit card transactions are witnessing a notable increase, driven by a combination of factors. According to market experts, the growth in credit card spending can be attributed to a lower base compared to the previous year and the festive season, which traditionally sees an uptick in promotional schemes and equated monthly installment (EMI) offers. The allure of these schemes, coupled with the festive spirit, is likely driving consumers to embrace credit card payments.
The shift towards digital payments in India is not only reflected in the growing popularity of UPI but also in the declining usage of cash. A recent paper by economist Pradip Bhuyan from the RBI’s Department of Currency Management emphasizes this trend, revealing that cash still accounts for 60% of consumer expenditure as of March 2024. However, this number is rapidly decreasing, showcasing the rapid adoption of digital payment methods across various sectors of the Indian economy. The share of digital payments has more than doubled, rising from 14-19% in March 2021 to 40-48% in March 2024, signifying a clear preference for cashless transactions.
The RBI’s data points towards a future where digital payments will continue to dominate India’s financial landscape. The increasing adoption of UPI and the decline in debit card usage reflect a changing consumer behavior, driven by convenience, cost-effectiveness, and the widespread availability of digital platforms. This shift towards a cashless society is likely to continue in the coming years, transforming the way Indians transact and manage their finances.
