India is expected to cross 10 billion Unified Payments Interface (UPI) transactions in June, experts told CNBC-TV18.com. This has happened due to the rapid digitisation of India's economy and the influence of technology in promoting financial inclusion, Subhrangshu Neogi, Executive Director & Co-Founder at Escrowpay said while speaking exclusively to CNBC-TV18.com.

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Further, UPI transactions are expected to reach a milestone of 1 billion transactions per day by 2026-27, according to a report by PwC India titled "The Indian Payments Handbook – 2022-27.” UPI. The report highlights that UPI is projected to dominate the retail digital payments landscape, accounting for 90 percent of the total transaction volume over the next five years.

What do numbers tell?

In May, UPI transactions already experienced remarkable growth, with a value of Rs 14.3 trillion and a volume of 9.41 billion. The transaction volume witnessed 58 percent increase compared to the same period in the previous financial year, while the transaction value rose by 37 percent.

The numbers for May are a significant uptick from April when the platform recorded 8.89 billion transactions.

In June, already in the first 10 days, India has crossed 3.2 billion transactions and it is expected that the country could be at the doorstep of 10 billion transactions in June, a News18 report also confirmed it.

If we look at yearly numbers, 45 billion UPI transactions were registered in FY 21-22, showing 8 times growth in the last 3 years and 50 times growth in the last 4 years, according to Press Information Bureau (PIB).

The month-wise data for the UPI transactions registered during the last year i.e 2022 is as under:

The rise of UPI

UPI was introduced by the National Payments Corporation of India (NPCI) in 2016 as an interface that allows users to connect multiple bank accounts to a single mobile application and instantly transfer funds. This system ensures safe and convenient money transfers between bank accounts and operates under the strict supervision of the Reserve Bank of India (RBI) and NPCI.

It soon gained widespread acceptance among the masses as the most popular digital payment method. PhonePe, Google Pay, Paytm, and Cred account for over 95 percent of the market share. Among the various sectors, online retail leads the way, followed by food delivery and mobility (represents cab and

bike aggregators), according to a report by Redseer Strategy Consultants.

The report further projects that 85 percent of businesses in India will be digitally enabled by FY26. This means that a large majority of businesses in India will have embraced digital technologies and processes for their operations, whereas UPI will have a majority share.

Take a look at UPI transactions percentage and the growth:

Here's a percentage of transactional value by payment modes across sectors (FY23):

(Source: Redseer)

According to Satyajeet Kunjeer, Founder and CEO at Deciml, this widespread adoption of UPI in not just tier 1 cities but also tier 2 and 3 cities in just a matter of 7 years, coupled with the demand for UPI in other countries is a testament to it being one of the most advanced payment systems today.

"What’s equally interesting and important to note is that alongside making the ecosystem of transacting simpler and more convenient, UPI is also enabling multiple associated financial services such as expense tracking, budgeting, saving, investing and more," he told CNBC-TV18.com.

Anup Nayar, CEO-Domestic, In-Solutions Global believes that government initiatives like Digital India and the push towards a digital economy are the main reasons behind UPI's growth.

UPI helps businesses scale

The Redseer report, mentioned earlier, highlights these:

Low merchant discount rate (MDR): More than 50 percent of UPI transactions are person-to-merchant (P2M), which allows businesses to increase their profit margins compared to card transactions that charge 1.5-2 percent as transaction fees. P2M transactions have shown high growth and low MDR, making them an attractive business option.

Ease in overseas expansion: In October 2022, NPCI International Payments Limited (NIPL) partnered with Bhutan, Singapore, Malaysia, and other countries. This collaboration aims to assist businesses in expanding their consumer reach and increasing their revenue streams from international markets.

Ease in credit card transactions: Linking credit cards with UPI can boost sales as customers can easily purchase products and services on credit without the inconvenience of carrying physical cards.

Wider customer reach: Integrating UPI with feature phones can assist businesses in reaching customers across various city tiers.

Seamless payment experience with UPI Lite: Eliminating the need for customers to enter their PIN for every UPI payment can increase the frequency of small-ticket transactions (up to Rs 200) thereby leading to an increase in revenue generation through UPI.