Mounting job losses and salary cuts across sectors coupled with limited use of cash due to COVID-19 apprehensions has changed the spending habits of citizens, according to data available from the National Payments Corporation of India (NPCI).
During May, June, and July, for example, the total number of transactions done through the NPCI’s Unified Payments Interface (UPI) stood at 1,234.5 million, 1,336.9 million, and 1,497.3 million, respectively.
The total value of transaction done via UPI in these three months amounted to Rs 7,707.6 billion, which was 24 per cent higher than all transactions done through the inter-bank immediate payment service (IMPS).
The reason for UPI, which is built on the IMPS platform, outstripping the latter as the preferred mode of payment was the massive decrease in the inter-personal transfer of funds as people opted more for precautionary savings, officials said, adding that IMPS is mostly used by people for lending short-term loans to friends and family or paying rents and other utilities.
“For UPI, if you see, the volume of transactions has soared by up to 10 times compared to IMPS. The total value, however, remains small as it has become the preferred contactless option even if it is for small payments at your daily grocery stores. The usage of cash has remained restricted due to COVID fear,” an official said.
According to data, the total volume of cash withdrawal transactions on all platforms supported by NPCI during May, June and July stood at 255.4 million, 290.3 million, and 283.9 million, respectively. The total value of cash withdrawn during these three months was Rs 3,389. 4 billion. Similarly, the total volume of IMPS transactions in May, June, and July stood at 166.9 million, 198.9 million and 222.1 million, respectively. The total value of transactions done via IMPS in these three months was Rs 6,021.2 billion.
Going ahead, this behaviour is likely to continue as people opt for more precautionary savings, the Reserve Bank of India (RBI) said in its July bulletin. “Looking further ahead in 2020-21, the COVID-19 pandemic is also expected to induce behavioural changes such as, increase in internet-based transactions vis-à-vis cash and card-based transactions,” it had said.
The trend was also observed in payments done through UPI based platforms supported by private players such as Razorpay.
In a report released in July, the company said that around 45 per cent of all transactions done through its platform were UPI-based, leaving behind transactions done through credit and debit cards, and even net-banking.
“UPI is gaining significant traction since the onset of lockdown. With time, contact-based payment models such as PoS (point-of-sale) machines will get replaced with new-age, contact-less mobile-based features such as dynamic QR (quick response) codes, AePS (Aadhaar Enabled Payment System), mATM, contactless biometric authentication and contactless card payment solutions,” Razorpay had said in its report.
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