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India embraces pay-online regime even as UPI crosses 1 billion transactions a month

Indian consumers are gradually moving from paying “in-line” to paying “online” with each passing year. There has been an increase in adoption of traditional as well as new retail payment products like debit cards, credit cards, Immediate Payment Services (IMPS) and Unified Payments Interface (UPI)
February 29 2020: Worldline India has today come out with  its  India Digital Payments Report 2019. The report is an analysis of transactions processed by Worldline and public databases to derive some unique insights.
Says Deepak Chandnani Managing Director, Worldline South Asia & Middle East:It is evident that payment systems in India have witnessed significant progress in the previous year and more importantly, the last decade. Though favourable factors like affordable mobile phones, internet packages and constant support from the regulator as well as from the government have unquestionably contributed to this growth, the real credit goes to fintechs and banks who are constantly implementing new technologies and delivering customer centric solutions to their customers.
The surge in card transactions and other products like UPI, IMPS, NETC etc. and the rise in number of POS terminals over the past few months have been encouraging. We can now anticipate that these retail payment products will collectively reduce cash dependency to a great extent provided there is an impetus to set up multiple acquiring touchpoints in the country.
Adds Sunil Rongala Vice President – Strategy, Innovation & Analytics: Currently, the primary channels to pay digitally for goods and services at physical merchant locations is through either a POS terminal or a QR (a printed one usually and in some cases a phone). There may be bells and whistles around both these form factors but there isn’t any substantive addition. What we think will be the game changer in the coming months will be the emergence and establishment of asset-lite technologies in merchant acquiring.
Asset-lite here refers to the acceptance of all forms of digital payments including cards not on the traditional POS machines but on merchants’ mobile phones. On this technology platform, merchants using an app on their phone will be able to accept payments through QR and cards; the latter will happen on NFC enabled cards through tap-on-phone technologies. Granted, currently merchants can accept only up to Rs. 2000 without a PIN but rapidly developing secure technologies will lead to the ability to accept PIN on Glass allowing them to accept larger amounts too.
Besides these 2 channels, merchants will also be able to send payment links to customers through SMS or WhatsApp enabling buyers to complete their transactions via an internet payment gateway.
Digital Payments Landscape in India
Indian consumers are gradually moving from paying “in-line” to paying “online” with each passing year. There has been an increase in adoption of traditional as well as new retail payment products like debit cards, credit cards, Immediate Payment Services (IMPS) and Unified Payments Interface (UPI) among others. In 2019, these four products recorded a combined transactions volume of over 20 trillion and combined value of over INR 54 trillion. It is worth mentioning that UPI remained the most preferred mode of payment in terms of volume followed by debit cards, IMPS and credit cards.
In terms of value, IMPS attained the ‘numero uno’ position throughout the year followed by UPI. Value of debit and credit cards remained nearly the same throughout the year.
The significant difference between IMPS and UPI volume as compared with debit and credit cards also highlight the fact that digital payment products are being primarily utilized for Person-toPerson (P2P) transactions than Person-to-Merchants (P2M) transactions. Going forward, it would be interesting to see whether the availability of NEFT 24x7 will have an impact on the usage pattern of UPI and IMPS transactions.
Unified  Payments  Interface
UPI is perhaps the fastest product to hit 1 billion transactions-a-month in 2019 since its inception in August 2016. It recorded a substantial transaction volume of 10.8 billion in 2019, a YoY increase of 188%. In terms of value, UPI facilitated transactions worth INR 18.36 trillion, up 214% from 2018. Nine banks were added in UPI ecosystem throughout the year, bringing the total number of banks providing UPI services to 143 as of December 2019
UPI’s Average Ticket Size (ATS) remained around INR 1600 in 2019 which indicate the rise in number of consumers preferring UPI for making small ticket size transactions. Further, in order to enhance UPI’s adoption among masses, NPCI has advised that the Regional Rural Banks (RRBs) can also participate in UPI as Acquirers, subject to RRB having a mobile banking permission from Reserve Bank of India (RBI) and post fulfilling its necessary certification requirements. On the other hand, Immediate Payment Service (IMPS) continued its strong growth in 2019. It recorded 55% YoY increase by facilitating about 2.3 billion transactions in volume. It clocked INR 21.8 trillion in terms of value, up 41% from 2018. In 2019, it on-boarded 165 banks under its ecosystem bringing the total number of banks providing IMPS services to the customers of 559 banks by end of 2019.
Merchant Acquiring
The number of POS terminals deployed by merchant acquiring banks increased to 4.98 million in December 2019 from 3.59 million in December 2018, registering a YoY increase of 39%. RBL bank, HDFC bank, State Bank of India, Axis bank and ICICI bank emerged as top 5 merchant acquiring banks to deploy POS terminals in 2019.
In a recent development, Reserve Bank of India in its sixth Bi-monthly Monetary Policy allowed Regional Rural Banks (RRBs) to act as merchant acquiring banks using Aadhaar Pay – BHIM app and POS terminals, like other commercial banks. This move may encourage RRBs to leverage their reach, especially in tier III and below to bring more merchants in digital payments arena in 2020.
National Electronic Toll Collection (NETC)
NTC transactions almost doubled in recent months post the rollout of government’s mandate to implement FASTag lanes across all national highways.
As of December 2019, 11.66 million FASTags have been issued since the inception of NETC program, of which, over 7 million tags were issued in 2019 alone. At present, there are around 535 toll plazas equipped with electronic toll collection infrastructure. Source: RBI NETC transactions volume in 2019 stood at 370 million, documenting a jump of 162% over previous year whereas its transactions value recorded a YoY increase of 57% with INR 80.6 billion.
Several bank and non-bank entities are contributing to the growth of NETC by offering discounts and cashbacks on FASTag issuance and recharge packages, with an aim to retain customer stickiness and also to attract new consumers.
The year 2020 may also witness adoption of FASTags across state highways and implementation of use cases like parking fee and payment at fuel stations etc
Aadhaar Enabled Payment System (AePS)
The country has witnessed full range of Aadhaar enabled banking services through AePS over the past few years. In 2019, the total volume of AePS transactions (ONUS, OFFUS, DEMO AUTH & eKYC) stood at 2.3 billion, achieving YoY growth of 12%. The value of transactions achieved a milestone of INR 1 trillion in 2019 with YoY growth of 31%.
AePS faced strong headwinds in the previous year but despite that it managed to grow at the steady rate. In the past few months, several use cases like Loan EMI collection for Joint Liability Groups in MFI industry, premium collections, payment on delivery etc. have been developed and operationalized on AePS based - BHIM Aadhaar service with an aim to enable wider financial inclusion. AePS is a bank led model which allows online interoperable final inclusion transaction at PoS (MicroATM) through the business correspondent of any bank using Aadhaar authentication. The four Aadhaar-enabled basic types of banking transactions are Balance Enquiry, Cash Withdrawal, Cash Deposit, Aadhaar to Aadhaar Funds Transfer.
(Worldline India (WI) is wholly owned by Worldline SA, a leading payments company in Europe that is listed on Euronext Paris. Worldline entered India in 2010 with the acquisition of Venture Infotek followed by the acquisition of MRL Posnet in 2017. While WI's business is primarily in India, it is expanding its footprint in the Middle East, Sri Lanka and Bhutan. Headquartered in Mumbai, it has offices in 10 cities and a reach in over 5000 cities and towns across the geographic spread of India.)