Increased UPI payments in India encourage overspending

Experts cautioned against greater overspending as UPI transactions proliferated in India. Impulsive purchases, particularly of expensive goods like gadgets and designer clothes, have increased as a result of the convenience of digital payments through UPI. As 74% of users acknowledged overspending, worries about the long-term financial effects grew. Experts were wary of UPI's popularity despite its convenience.

The increasing preference for purchases through UPI/QR codes can be attributed to the convenience of completing digital transactions swiftly using smartphones. A recent survey conducted by IIIT Delhi revealed that approximately 74 per cent of individuals in the country are engaging in 'overspending' due to utilising UPI and other digital payment methods.

"The convenience and ease of digital transactions through UPI, in comparison to cash, may indeed lead to lower awareness of spending, as transactions are seamless and reduce the tangible feel of money leaving one's possession," Prabhu Ram, Head of Industry Intelligence Group at market intelligence firm CMR.

According to the most recent figures released by the National Payments Corporation of India (NPCI), UPI transactions surged to 1.33 billion in April. This represents a 50 per cent year-on-year growth in UPI transaction volume. The previous year saw a remarkable 60 per cent increase in UPI transactions, reaching an all-time high of 11.768 billion.

The average ticket size (ATS) of UPI transactions has declined 8 per cent, dropping from Rs 1,648 to Rs 1,515. Experts note in the report that consumer spending in India is rising, which is evident in increased purchases of cars, smartphones, TVs, and other goods, contributing to the country's economic growth. However, this trend has also led to instances of overspending on certain high-value items facilitated by UPI.