The Reserve Bank of India’s recent data reveals a notable shift in India’s payment dynamics, marked by a 46% YoY surge in Unified Payment Interface (UPI) transactions in November. In stark contrast, debit card transactions witnessed a 6.6% YoY contraction in October. This decline has sparked discussions on evolving digital payment preferences across the nation.

In terms of value, UPI transactions in November settled at ₹17 lakh, starkly overshadowing debit card transactions, which accounted for just a third of this amount. The surge in UPI usage is attributed to its convenience for microtransactions, coupled with the growing popularity of mobile wallets, contactless payments, and online platforms.

Atish Shelar, COO of Tech Fini, notes a noticeable inclination towards alternative payment methods among consumers. Security concerns, shifting preferences, and fintech innovations further contribute to the declining relevance of debit cards. In FY 2023, 114 billion digital payments were recorded in India, with 52% of households opting for the UPI platform, while only 38% used debit or credit cards for online shopping.

The adoption of UPI in semi-urban and rural areas has seen a substantial surge, with transactions in retail stores increasing by 118% in volume and 106% in value. A PayNearby report highlights UPI’s growing penetration beyond tier-II regions, accompanied by a 5% growth in mobile point-of-sale (mPOS) acceptance among small merchants.

Despite a considerable number of debit cards issued following the Pradhan Mantri Jan Dhan Yojana, the growth trajectory remains flat. In contrast, credit card usage is on the rise, possibly due to enticing rewards, cashback, and discounts, along with the added benefit of a grace period for payment or installment options.

Considering the current momentum, the trend of declining debit card usage may persist into 2024. Factors such as convenience, security, and incentives offered by UPI and credit cards continue to draw users away from traditional debit card transactions. Rapid fintech advancements and the expanding digital payment solutions in rural and semi-urban areas could further accelerate this decline.

Convenience and Innovation Drive Shift in Payment Trends as UPI Surpasses Debit Cards

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