Usage of Debit card slowed down in three years due to UPI
After the pandemic, due to the surge in digital transactions debit card payments remained sluggish. As per RBI, the Unified Payments Interface (UPI) has emerged as the most popular mode of money transfer especially for small value transactions.
In July 2020, the total debit card spends stood at Rs 2.81 trillion whereas in July 2023, it stood at Rs 3.15 trillion. This reflects a growth of 11.96 percent.
The data highlighted that UPI spends witnessed a growth of 428 percent, zooming from Rs 2.90 trillion to Rs 15.33 trillion during the same period.
“The increased usage of UPI for micro transactions due to the convenience has caused a serious dent in the debit card usage with customer preference undergoing a shift,” said Sunil Rongala, senior vice-president, head of Strategy, Innovation & Analytics, Worldline India
UPI transactions reached Rs 10 billion for the first time in a month, in August this year.
Monthly UPI payments in value terms are now clocking at more than Rs 15 trillion.
Banks issued 852.35 million debit cards in July 2020. In 2023, the number reached 970.74 million, indicating a flat growth trajectory.
This was due to the Pradhan Mantri Jan Dhan Yojana (PMJDY), which gave account holders a debit card during the opening of a Basic Savings Bank Deposit Account.
“A multi-fold increase seen in UPI transactions in the past decade is driven primarily by an increased user base due to higher penetration seen towards rural India. This was also supported by the expanding account base in terms of linkage with savings accounts, Rupay credit cards and current accounts, no additional cost on transfers, hassle-free transactions and the increased internet and smartphone penetration,” Aniket Dani, Director of Research, Crisil Market Intelligence and Analytics.
With the government attaching an increased importance to digitisation, the growth in UPI transactions is likely to continue with transactions expected to touch 20 billion per month over the next 18 months.
“Over time, P2M [person to merchant] transactions will drive UPI transactions growth and it will be no surprise if UPI transactions hit 20 billion a month in 18-24 months,” Rongala added.
The growth in UPI spends is expected to expand further in the medium term with a large user base yet to join the platform. The main challenge in the trend is the continuous reliance on cash, which still contributes to a significant portion of customer transactions.
“The key challenger to the growth of UPI will be liquid cash. India can be a less cash economy, but it can never be a cash-free economy. Debit cards will not completely vanish, but they will continue to hold their own place in the market,” Rongala added.
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