Unified Payment Interface or UPI is now the bedrock for India's digital payment ecosystem, more so in urban cities. Kearney's How Urban India Pays report shows that in FY2024, UPI made up a significant 68 per cent of total retail digital payment volume across the country, marking a watershed moment in consumer behaviour.
The report covered more than 6,000 consumers and over 1,000 merchants across 120 cities to highlight the transformative role of digital payments. In addition, the report unveiled the Degree of Digital Payment Usage (DDPU) metric that measured transaction volume, variety, and openness to innovation. Almost 90 per cent of respondents preferred digital payments for online transactions, while 50 per cent extended this preference offline. Millennials and Gen X were the first adopters of digital, while Boomers became increasingly comfortable with UPI and credit card transactions.
Key Enablers of Success for UPI
Convenience: Payments can be easily made through instant transfers, and it is available across demographics for users to use
Innovation: Solutions such as UPI Lite will accelerate small-value transactions with less need for PIN authentication
Inclusiveness: From street vendors to major retailers, the all-rounded acceptance of UPI makes sure both daily essentials and high-value transactions are catered to by it. Metro city consumers use UPI extensively for daily commute, grocery shopping, and dining out, appreciating its speed and security.
UPI and Next Generation Payment Systems
Though UPI currently rules the market, newer acceptance platforms like Buy Now, Pay Later (BNPL) and wearable payments are adding up. The survey found that the users were aware of 87 per cent of BNPL. Its usage for transaction amounts less than Rs 5,000 was at 34 per cent. More than 46 per cent of the users have at least one co-branded credit card in their wallet, which reflects a trend towards credit-based digital solutions.
Challenges and Opportunities
Despite such a huge following, UPI has several challenges lying ahead:
Internet Connectivity: In this regard, 51 per cent of the respondents said that Internet Connectivity is a reason to prefer cash
Security Concerns: The risk of fraud and double debit has made people frightened; consequently, they make the decision not to bank. Fraud detection systems and financial education in underserved regions are helping overcome the drawbacks of cash usage.
The report also foresighted that the retail digital payment value in India doubled from USD 3.6 trillion in FY2024 to USD 7 trillion in FY2030 with UPI leading it. Innovations are expected from the urban usage base. New adoption hubs are likely to emerge from the small towns. Internationally, UPI is expanding its footprint and is already accepted in countries like UAE, Singapore, France, Oman, Malaysia and so on.
