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The popularity of UPI (Unified Payments Interface) has surged, with its transaction volume now 38.4 times higher than that of credit cards, according to a report from Axis Securities. Between August 2019 and August 2024, UPI transactions grew at an impressive rate of 75% per year, while UPI spending increased by 68% per year. In contrast, the growth of the credit card industry has slowed down.
UPI is especially favored for smaller payments, with 96% of its transactions being under Rs 2,000. However, these smaller transactions only make up 33% of the total spending through UPI. As a result, UPI spending compared to credit card spending is still low, at 0.3 times.
In terms of credit card growth, the industry added 924,000 cards in August, up from 755,000 in July, but this marks a 34% decline compared to the same time last year. The report suggests that card issuers are being cautious due to concerns about asset quality and are selectively choosing customers. In the first five months of FY25, the industry added 3.7 million cards, down from 6 million in the same period last year.
While credit card use is increasing, debit card transactions and spending have decreased significantly, with volumes dropping by 20% and spending by 6% over the same five-year period.
Private banks are doing better than public and foreign banks in customer growth. In August, they accounted for 63% of new customers, adding 583,000 of the total 924,000 new customers.
Looking ahead, the report anticipates that growth will pick up again with the upcoming festive season.
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