Surge in UPI Transactions Reflects Growing Digital Payment Adoption in Rural and Semi-Urban India

Transactions through the United Payments Interface (UPI) at retail establishments in rural and semi-urban areas of India witnessed a substantial increase of 118% in 2023 compared to the previous year, signaling a growing acceptance of online payments in Tier-II cities. The report, titled ‘Retail-O-Nomics’ by fintech firm PayNearby, revealed a corresponding 106% rise in transaction value. The study, conducted between January and November and covering over a million shops, highlighted the noteworthy growth in Mobile Point of Sale (mPOS) adoption, which increased by 5% in 2023.

The transactions facilitated through UPI encompass not only banking and financial services but also extend to digital services such as utility payments, cash collection, credit, insurance, assisted commerce, and more. This shift in consumer behavior in these regions indicates a significant move toward assisted digital methods for various banking and lifestyle needs, contributing to the integration of these areas into the formal economy.

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The government, in a statement to Parliament on December 18, emphasized the pivotal role of UPI in driving the overall growth of digital payments in India. UPI transactions have surged from 92 crore in 2017-18 to 8,375 crore in 2022-23, reflecting a Compound Annual Growth Rate (CAGR) of 147% in terms of volume. This surge in digital transactions has led to a notable decline of 7.8% in banknote circulation in the fiscal year 2022-23.

Bhagwat K Karad, Minister of State for Finance, highlighted the dominance of UPI, constituting 62% of digital payment transactions in 2022-23. The Year-on-Year growth in the value of banknotes in circulation has decreased from 9.9% in 2021-22 to 7.8% in 2022-23.