UPI transactions rise 27% in first half of financial year despite September dip

UPI transactions rise 27%

UPI's digital tap-to-pay habit appears to be getting stronger by the month. The platform processed around 145 billion transactions in the first half of the current financial year, up 27% from 114 billion in the same period last year, according to National Payments Corporation of India (NPCI) data. The value of those transactions rose at a slightly slower clip, climbing 20% to Rs 177 lakh crore from Rs 148 lakh crore a year earlier. However, September numbers showed a marginal month-on-month decline in both UPI volume and value. During the month, transaction volume stood at 24.07 billion, down 1.7% from 24.5 billion in August. The value of transactions fell 1.5% to Rs 29.37 lakh crore from Rs 29.82 lakh crore in the previous month. The monthly decline, however, needs to be viewed in the context of the difference in the number of days in the two months. August had 31 days, compared with 30 in September. Industry watchers pointed out that despite the lower monthly numbers, the average daily transactions were higher in September at 802 million, against 791 million in August.

New MDR regime starts October 15

The September data comes just two weeks before the implementation of a new merchant discount rate (MDR) on specified high-value UPI payments. From October 15, merchants will be charged an MDR of 0.4% on UPI transactions above Rs 2,000. The charge will apply to merchant payments and not person-to-person transactions, which will remain free irrespective of the amount involved. The new MDR framework is aimed at creating a sustainable revenue model for the digital payments ecosystem. MDR is the fee merchants pay to payment service providers for processing digital transactions. The amount collected through the MDR will be distributed across the UPI ecosystem. Customers' banks will receive 40% of the MDR, payment gateways 30%, UPI apps 20% and the sponsoring bank of the UPI app the remaining 10%, PTI reported. The charge will be paid by merchants rather than consumers and will be capped at Rs 300 for transactions of Rs 75,000 or more.

Everyday UPI payments to remain free

The new charge will not apply to person-to-person payments. The vast majority of everyday merchant transactions will also continue to remain free. A separate fee structure has been set for certain essential services. Transactions above Rs 2,000 involving railways, telecom, fuel and insurance will attract a flat Rs 5 fee per transaction. For capital market transactions, including mutual funds and stockbroking, the MDR will be 0.02%, subject to a cap of Rs 300. Small merchants will also remain outside the new charge if they collect up to Rs 1 lakh a month through UPI QR codes. This exemption covers about 96% of all merchant transactions.

Pay via UPI in 11 countries

UPI's reach has also extended beyond India, with the payment system now accepted in 11 countries. Uzbekistan is the latest addition to the list. UPI is also accepted in Singapore, the United Arab Emirates, France, Mauritius, Nepal, Bhutan, Qatar, Sri Lanka, Cambodia and Greece. NPCI, an initiative of the Reserve Bank of India (RBI) and the Indian Banks' Association (IBA), operates as the umbrella organisation for retail payments and settlement systems in India. It runs UPI, which enables real-time payments between individuals as well as payments to merchants. Since its launch on August 25, 2016, UPI has seen a sharp rise in transaction value. Transactions worth Rs 0.07 lakh crore were recorded through the system in FY17. By FY26, the figure had risen to around Rs 314 lakh crore, an increase of more than 4,000 times over the decade.