The success of UPI as a payments and settlement platform has impacted two widely-used channels – the NEFT (national electronic fund transfer) platform and debit cards. In November, UPI transactions experienced a significant 46% year-on-year growth, outpacing the slower 17.5% rise in NEFT. Additionally, the Reserve Bank of India’s latest data revealed a 6.6% year-on-year decline in debit card transactions in October, indicating reduced NEFT and debit card use.
In terms of monetary settlement, UPI surpassed debit card transactions by achieving three times the settlement amount in November, recording Rs 17 lakh.
Besides extensive use in financially aware urban areas, UPI is gaining traction in semi-urban and rural regions.
According to a PayNearby report, UPI transactions in semi-urban and rural stores grew substantially in both volume (118%) and value (106%). This underscores the expanding adoption of UPI beyond Tier II regions. Market players observe that UPI is increasingly the preferred choice for e-commerce transactions, replacing older platforms like NEFT and debit cards.
In the evolving digital payments landscape, UPI is positioned to dominate B2C and C2C transactions, with smaller B2B dealings seamlessly integrating UPI and cards. While NEFT remains prevalent for substantial B2B transactions, the future suggests the continued prominence of UPI and NEFT, potentially phasing out physical debit cards in favor of virtual debit cards. The RBI actively contributes to the digital drive by widening eligible areas and enhancing UPI transaction limits, including higher limits for specific transactions without additional authentication requirements.
