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India’s digital payments grow significantly

The United Payments Interface (UPI) has broken a new record, crossing IN₹5 trillion (US$68.8 billion) in value in March across 2.30 billion transactions. UPI is an instant real-time payment system that facilitates inter-bank transactions. It was developed by the National Payments Corporation of India (NPCI).

According to a news report, the March numbers come after a marginal dip in February. Over the past year, UPI has seen exponential growth. Data from the government’s DigiDhan dashboard show that the Bharat Interface for Money (BHIM UPI) was the most popular means of digital payments amounting to 38.77% of all such payments in 2020-21.

Over the year, NPCI is looking to cap each company’s market share in UPI. An official statement explained that UPI transactions on third-party payment apps cannot exceed 30% of the overall volume of transactions processed in UPI during the preceding three months. Although the cap became effective at the beginning of January, existing third-party operators like Google Pay and PhonePe, who have a 40% market share, have been given until 2022 to comply with the new rules.

Regarding digital payments infrastructure, in February, NPCI said it was upgrading the IT systems of all its key payment channels, including the UPI. The modifications would focus on enhancing capabilities to process increased volumes, improving resilience to external outages seen at banks, and will include an architectural revamp of IT systems to better process credit return pile-ups. NPCI also announced it is working on a digital payment product for feature phone users and those who do not use mobile applications.

NPCI was incorporated in 2008 as an umbrella organisation for operating retail payments and settlement systems in India. It brings innovation to the retail payment systems through the use of technology and is working to transform India into a digital economy.

As per the latest data, India’s fintech is a US$100 billion opportunity and UPI has had a major role to play in that. From large payments players to upcoming RegTech startups, India’s public digital infrastructure has significantly boosted FinTechs in the country. On top of Aadhaar and UPI, several layers like the Bharat Bill Payment System and Aadhaar Enabled Payment System have been built.

A report explained that the country’s financial technology companies are poised to become three times as valuable in the next five years, reaching a valuation of US$150-160 billion by 2025. India’s dynamic FinTech industry has over 2,100 FinTechs of which 67% have been set up over the last five years alone. The total valuation of the industry is estimated at US$50-60 billion.

The industry’s growth has been undeterred by the pandemic, as it has seen the emergence of three new Unicorns since January 2020. Another media report noted that India had the highest number of real-time online transactions in 2020. The country processed around 25.5 billion real-time payments transactions, followed by 15.7 billion in China, 6 billion in South Korea, 5.2 billion in Thailand, and 2.8 billion in the UK. Among the top ten countries, the US was ranked ninth with 1.2 billion transactions. The transaction volume share for instant payments India, among real-time transactions, was 15.6% and 22.9% for other electronic payments in 2020.

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