UPI transactions Fall by 20% due to Lockdown, Lowest in 12 Months

Due to the lockdown imposed to contain the spread of COVID-19, UPI has recorded transactions of less than one billion for the month of April after 12 months of constant growth. This is the first time in the past seven months that UPI volume went below the one billion mark. According to the National Payments Corporation of India (NPCI), UPI has registered 0.99 billion transactions amounting to Rs 1,51,140 crore(Rs 1.51 trillion).

Unified Payments Interface (UPI) is an instant payment system developed by the National Payments Corporation of India (NPCI), an RBI regulated entity. UPI can be used through various apps like Google Pay and PhonePe to make direct payments from one bank account to another.

The lockdown imposed by government due to COVID-19 has caused everything to shut down or just semi-operational. The coronavirus outbreak has devasted many sectors of human life, let it be financial sector, industrial sector, etc. resulting into economic crisis.  Yet, India’s success with unified payments interface (UPI) has continued to bring essential services to consumers amid the lockdown as well.

Though the government was able to transfer the relief money through UPI in the bank accounts of crores of Indians, UPI witnessed 20.8% drop in volume and a 26.7% fall in value as compared to the previous month. As corona effect, UPI had registered a little drop in payments volume in March resulting from 1.25 billion transactions worth Rs 2,06,462 crore or Rs 2.06 trillion.

Moreover, along with UPI, NPCI’s real-time payments service IMPS has also registered a sharp fall in volume as well as the value of transactions. In April, IMPS processed 122.47 million payments worth Rs 1,21,140.79 crore which is almost half of the previous month. In the previous month i.e. March, the figure was 216.82 million transactions worth Rs 2,01,961.70 crore.

The decline is shocking as in February 2020, the RBI governor, Shaktikanta Das, had highlighted that digital payments accounted for almost 97% of the daily payment system transactions in terms of volume. He also mentioned that digital payments had accelerated by 50% in terms of volume in the last five years.

However, UPI body NPCI’s CEO Dilip Asbe said,
“ For the last five years, the number of transactions of UPI has been growing continuously month-on-month. But now there has been a slight drop in the volume due to the lockdown. The drop in volumes is due to near-zero restricted spends such as on e-commerce, travel, and similar online platforms. We expect volumes to pick up soon.”

Reasons behind the Drop in Transactions

It was anticipated that a nationwide lockdown to curb the spread of the Covid-19 pandemic would affect the digital payment volumes. However, financial experts were assured that digital payments will not get affected adversely but rather continue to grow as people would rely on digital transactions to avoid physical contact.

During the initial days of the lockdown, e-commerce, foodtech, grocery as well as other online platforms were unable to operate. This led to gradual fall in transactions but later the government had allowed essential services to continue. Moreover, payments to PM-CARES via UPI have been the driving force behind UPI’s growth which is still 20.8% drop and these numbers are only in a few million.

Yet, transactions did not comeback to the normal as government only allowed transactions on essentials. Hence, a majority of e-commerce services are still waiting for government orders. Soon, the government is likely to relax the norms for e-commerce platforms and allow them to deliver non-essential goods as well.

According to payment gateway Razorpay’s digital transaction report, for the month of April the transactions in the logistics have dropped by 96%, the travel sector has declined by 87%, food, and beverage by 68% and groceries by 54%. In the last 30 days, transactions in cities like Ahmedabad, Mumbai and Chennai took a hit of 43%, 32% and 25% respectively. The report recorded transactions between, when the lockdown was announced.

Razorpay’s report also stated that UPI emerged as the most popular digital payment method from March 24 to April 23,  with 43% of the total transactions during the period. It was followed by card payments with 39% and net banking with 10%. However, compared to previous month, transactions through UPI declined by 37%, cards by 30% and net banking by 28%.

Travel Restrictions affected the Digital Payments

The fall in UPI and digital payments is not only because of global and national lockdowns and restrictions on non-essential segments but due to restrictions on tour, travel as well. During the lockdown, people are not allowed to travel by train or aeroplane. This resulted into massive fall in transactions as people cannot book tickets of train or plane.

The report revealed that the metro cities were affected the most and the impact was still limited in other cities and towns. This difference in impact is more significant in metro cities because the number of people travelling by air, especially for work, is also higher in the metros. The report added that leading firms are also processing fewer online and offline digital transactions with air travel, hospitality, and retail being the three most-impacted sectors.

Read More: Coronavirus Impact on Digital Payments Startups

Steps taken to deal with the Drop

As of now, NPCI seems prepared to handle the lockdown. CEO Dilip Asbe said that NPCI can multiple sessions and has a spare capacity to handle the demand. In order to ensure that everything keeps running smoothly, around 5% of the NPCI’s workforce is still going to office.

NPCI has already devised a plan for the situation with due consideration of all the factors. Asbe said that NPCI has received complaints from some businesses about delays in cheque clearing. He added that there could be issues on the last mile. While we are in touch with banks, there might be some issues with uploading because of the lockdown.

These issues are might be hard to resolve now as most of the workforce isn’t available now. However, Asbe said that the main objective here is to keep employees safe. If they are safe, the operations can be managed. There are things we cannot disclose, but there is enough backup in case something goes wrong.

Government is also using UPI technology for facilitating the transfer of money in the bank accounts of beneficiaries within a day under Pradhan Mantri Garib Kalyan Yojana (PMGKY). He noted that besides this transfer of relief funds, the government has been using UPI for transferring monetary perks in various schemes such as Ujwala and MNREGA.

After the success of the implementation of UPI in these schemes, many state governments are now relying on UPI technology to transfer funds under various schemes. Madhya Pradesh government which recently transferred some relief money in the accounts of lakhs of construction workers. PM Narendra Modi has urged people to go for digital payment to ensure safety from the infection.

Also Read: Best Payment Gateways in India for Your Business

Meanwhile, several big names in the Indian startup ecosystem have come forward to appeal. Amitabh Kant, CEO of Niti Aayog and Rajan Anandan, managing director of Sequoia Capital India, have been encouraging people to make online payments. Both Kant and Anandan through social media have emphasised that digital payments are the safest way to make payments to ensure minimum exposure to coronavirus.