Digital payments across India have surged significantly, reflecting the country's increasing reliance on online transactions. According to the latest data from the Reserve Bank of India (RBI), the Digital Payments Index (RBI-DPI) recorded an impressive growth rate of 11.1% year-on-year as of September 2024, underscoring the robustness of the digital payment ecosystem.
The RBI-DPI, which tracks the progress of digital payments, reached 465.33, up from 445.5 as recorded earlier in March 2024. This upward surge highlights the advancements made since the index's introduction on January 1, 2021, aimed at measuring digitization of payments throughout the country. The index is published biannually and reflects various key metrics pertaining to the digital payment infrastructure.
Crucially, the RBIs analysis attributed this recent growth to enhancements across payment infrastructure and performance. The RBI's focus on fostering a digital-first approach has paved the way for broader acceptance and usage of digital payment methods.
The RBI-DPI is calculated based on five distinct parameters: Payment Enablers (25%), Payment Infrastructure (with 10% allocated to demand-side factors and 15% to supply-side factors), Payment Performance (45%), and Consumer Centricity (5%). These categories play pivotal roles in assessing India’s digital payment penetration and deepening.
Leading this explosive expansion is the Unified Payments Interface (UPI), which the RBI notes as the primary driver behind the digital payments growth narrative. Evidence of UPI’s dominance is reflected in the dramatic rise of its market share, which increased from 34% in 2019 to 83% by 2024. This corresponds with UPI's remarkable compound annual growth rate (CAGR) of 74% over the past five years.
While UPI is experiencing unprecedented growth, other traditional payment systems are losing their grip on the digital payments market. Data indicates the collective share of alternatives like Real Time Gross Settlement (RTGS), National Electronic Funds Transfer (NEFT), and credit/debit cards has plummeted from 66% to 17% during the same period.
Transaction volumes for UPI demonstrate it’s not just the market share fueling this growth—the sheer number of transactions has skyrocketed as well. UPI transaction volumes soared from 375 crore transactions in 2018 to 17,221 crore by 2024. Alongside volume growth, the value of these transactions also saw dramatic improvements, jumping from ₹5.86 lakh crore to ₹246.83 lakh crore, resulting in CAGRs of 89.3% and 86.5% respectively.
By emphasizing the continuing evolution of digital payments, the RBI bolsters workshops and initiatives aimed at educating the public on digital platforms, improving financial literacy, and ensuring greater accessibility to digital financial services.
These progressive efforts are evident not just from anecdotal evidence but are reinforced by the RBI's commitment to continually support the growth and adoption of online transactions across various demographics, particularly among individuals and small businesses.
Looking to the future, as of January 2025, the RBI remains optimistic about the continued evolution of digital payment systems, especially as innovations bring forth new solutions to cater to the burgeoning tech-savvy population. With greater internet penetration and mobile wallet usage, this trend is likely to be sustained, ushering India firmly onto the global digital finance stage.
The RBI's forward-thinking approach, coupled with the acceptance of UPI as the new normal for financial transactions, paints a promising picture for the growth of digital payments. The central bank's consistent enhancements to infrastructure and focus on performance metrics will be fundamental to managing and sustaining this growth long-term.