The National Payments Corporation of India (NPCI), which won the 2018 businessline Changemaker of the Year Award, has today become the nucleus of the country’s digital payments ecosystem.
Pioneering platforms and products such as Immediate Payment Service (IMPS), National Financial Switch (NFS), Bharat Interface for Money (BHIM), Bharat Bill Payment System (BBPS), National Automated Clearing House (NACH), and Aadhaar Enabled Payment System (AePS), have earned NPCI the spot of one of two Indian companies to be featured in the TIME 100 Most Influential Companies list for 2023.
The flagship though by far has been the real-time payments system, Unified Payments Interface (UPI), which has transformed India’s payment landscape one feature at a time.
UPI transactions crossed the ₹15-lakh-crore milestone in July 2023, with a total of ₹15.34-lakh-crore processed on the network that month. The number of transactions was also at a high of 996 crore.
Starting off as a simple peer-to-peer payments platform, UPI has come a long way to now being accepted internationally and becoming a medium to extend retail credit lines, which is expected to significantly increase the potential use-cases of the platform.
Given that monetisation of the payments infrastructure remains a struggle for both NPCI and private players with the mandate of zero MDR (merchant discount rate) for all UPI and RuPay debit card transactions, NPCI then started looking at avenues such as the recently announced interchange fee of 1.1 per cent for transactions over ₹2,000 applicable via pre-paid instruments.
However, bank-to-bank account transactions, which account for over 99 per cent of those on UPI, continue to be free with NPCI supporting a bulk of its expansion activities through internal accruals. Even so, NPCI holds the highest profit pool in payments given its product bouquet and recordeda profit of ₹773 crore for FY22.
According to PwC India’s Payments Handbook for 2022-27, UPI is expected to reach 100 crore transactions per day by FY27 and dominate the retail digital payments landscape, accounting for 90 per cent of the total transaction volume over the next five years.
Another game changer has been the RuPay card network, which has challenged the duopoly of Visa and MasterCard and has grown to become a dominant player in the market. Despite being a late entrant, RuPay already has the largest market share in debit cards in terms of cards-in-force and around one-third share in terms of transactions, aided by support from PSU banks.
About 25 per cent of all new credit card issuances is happening on the RuPay network. Currently, of the over 30 crore UPI users, only 2.5–3 crore are credit card holders even though 52 per cent of UPI customers are credit active. This provides NPCI with a huge opportunity to grow its credit card portfolio and market share now that the RuPay network has been integrated with UPI.
The challenge will now be to build the technology and infrastructure to support expanded volumes of transactions and expand global merchant acceptance points while ensuring customer data safety and transparency with better speed and efficiency.
Over the next year, NPCI plans to garner 10 per cent market share in monthly credit card spends as compared with 1 per cent currently which translates to transaction processing of around ₹1,300-1,500 crore.
NPCI is already registered as National Critical Infrastructure which entails emphasis on cyber risk mitigation, monitoring overseas traffic and constant oversight of the NPCI board and the RBI. It has also put in guardrails to ensure that only full KYC-compliant wallets can be enabled on UPI and for any player to offer these services, they need to be certified by it.
The next phase of growth is seen dependent on increased smartphone penetration and internet connectivity, especially in rural areas. Here, the three-ponged governmental push for indigenously-developed digital goods — UPI, Aarogya Setu and DigiLocker — will definitely help.
(The Changemaker Awards 2023 will take place in New Delhi on November 3)