The first quarter of 2022 in India saw 9.36 billion transactions of INR 10.25 trillion processed via payment mechanisms such as debit and credit cards, prepaid payment instruments such as mobile wallets and prepaid cards, and UPI P2M. (Person to Merchant). UPI P2M transactions emerged as the most favoured payment option among customers, accounting for 64% of total volume and 50% of the total value. Given the expansion of UPI, this is not entirely surprising. However, there are two aspects worth mentioning. Credit cards accounted for 7% of transactions but 26% of value, demonstrating that customers continue to prefer to utilise credit cards for high-value transactions. Debit cards represent for 10% of transactions but 18% of value – the volume and volume have decreased from prior years, most likely due to the rise of UPI.
Unified Payments Interface
In the first quarter of 2022, UPI recorded over 14.55 billion transactions in volume and INR 26.19 trillion in value. Its transaction volume and value have nearly doubled since last year, with a 99% increase in volume and a more than 90% increase in value when compared to Q1 2021. State Bank of India, HDFC Bank, Bank of Baroda, Union Bank, and Paytm Payments Bank were the top remitter banks in Q1 2022, while Paytm Payments Bank, State Bank of India, YES Bank, Axis Bank, and ICICI Bank were the top beneficiary banks.
As of March 2022, the average ticket size (ATS) for UPI P2P transactions was INR 2455 and INR 860 for P2M transactions.
With merchant adoption of UPI increasing rapidly, the ATS of UPI P2M transactions is steadily increasing, while the ATS of P2P transactions is decreasing, however, this is due to the volume of transactions as well as a shift to P2M transactions. P2M transactions increased by 24% in Q1 2022 compared to Q1 2021. In Q1 2022, 56% of total UPI volumes were P2P, while 44% were P2M; in terms of value, P2M transactions accounted for approximately 19% of total UPI transactions.
The overall number of POS terminals deployed by merchant acquiring banks as of March 2022 was 6.07 million, with over half a million POS terminals deployed during Q1 2022. When compared to the previous year, POS deployment increased by more than 28% in Q1 2022.
The overall number of Bharat QRs was 4.97 million in March 2022, a 39% increase over March 2021, while UPI QRs were 172.73 million, an 87% increase over March 2021.
Overall, private sector banks accounted for over 70% of the POS terminal market, while public sector banks accounted for 22%. Payments banks accounted for 7% of the market, while foreign banks maintained their 1% stake.
Top POS deployers
The top acquiring banks in terms of POS deployment are HDFC Bank, Axis Bank, ICICI Bank, State Bank of India, RBL Bank, Paytm Payments Bank, IndusInd Bank, and Union Bank of India. When compared to Q1 2021, Axis Bank and ICICI Bank increased their POS market share by more than 68 per cent and 52 per cent, respectively. Paytm Payments Bank grew by 66 per cent to become one of the top banks deploying POS terminals.
Grocery stores, restaurants, clothing and apparel, pharmacy and medical, hotels, jewellery retail, speciality retail, household appliances, and department stores accounted for more than 60% of total volume and over 58% of total value in Q1 2022. E-commerce (shopping for goods and services), gambling, utility, and financial services accounted for more than 85 per cent of online transactions in terms of volume and 47% in terms of value.
By the conclusion of the first quarter of 2022, there were 991.28 million credit and debit cards in circulation. While the number of outstanding credit cards climbed by 19% from 62.04 million in March 2021 to 73.6 million in March 2022, the number of outstanding debit cards increased by only 2% during the same period, from 898.20 million to 917.66 million. Around 23 million debit cards were taken from circulation during Q2 2022, which could be a revision in reported statistics by banks or the termination of dormant accounts.
Transaction analysis of Credit cards
Credit card volume and value were 2.02 billion and INR 8.77 trillion in Q1 2022, respectively. Credit card transactions at POS accounted for 305.83 million, while e-commerce accounted for 302.13 million. In terms of value, people spent INR 1040.03 billion at POS and INR 1770 billion on eCommerce using credit cards in the first quarter of 2022. Even though credit card volume at POS and e-commerce are roughly similar, the value of e-commerce transactions is much larger than the value of POS transactions. This is consistent with the general trend of transactions shifting from physical to digital spaces.
Transaction analysis of Debit Cards
In the first quarter of 2022, the volume and value of debit card transactions were 942.7 million and INR 1.81 trillion, respectively. POS transactions accounted for 585.11 million of the total debit card volume, while e-commerce transactions accounted for 357.6 million. In terms of value, POS terminals processed INR 1.15 trillion, while e-commerce transactions processed INR 667.23 billion.
The implication is that consumers are becoming more comfortable making large-ticket online purchases with credit cards, while debit cards are more commonly used for small-ticket purchases at physical touchpoints. Customers can use their cards to purchase high-value items and services through value-added services such as EMI and BNPL. According to a whitepaper titled ‘India taps into a Contactless Future’ released by Visa and Worldline India, at peak COVID-19 hours, the number of domestic F2F transactions increased by only 6.25%, but contactless transactions increased by 28.5% compared to March 2020. According to Worldline data, while 25% of all supermarket transactions were contactless in January 2020, this figure rose to 31% by January 2022.
Mobile and Internet-Based Payments
In India, there were over 658 million internet users and approximately 1.2 billion mobile customers as of January 2022. In the first quarter of 2022, consumers made 15.6 billion mobile payments, while Net Banking / Internet browser-based transactions surpassed 1 billion. In terms of value, mobile transactions totalled INR 44.68 trillion, while internet transactions totalled INR 163.53 trillion. It should be emphasised that while internet browser-based payments accounted for 6% of total volume, they accounted for 84% of the total value, with mobile payments accounting for the remainder.
The key findings are that mobile payments are becoming more common and are being utilised for modest-cost transactions, whereas internet browsers are the favoured channel for traditional buying from e-commerce sites.