Size does matter: Debit cards for large payments & UPI for smaller ones

• The average ticket size of debit cards grew by 24% in H2 2023, even as their value and volumes fell.
• UPI’s average ticket size fell by 8%, mainly indicating a wider usage for almost all types of transactions.
• While card transaction volume and value are falling, credit cards are bucking the trend.
  

Indians have gotten habituated to fishing out their phones instead of cards, and that’s been fuelling a remarkable increase in UPI payments. Unlike their uppity cousins (credit cards), debit cards have been losing out on transaction value and volume. But all’s not lost for these ubiquitous cards.

People seem to ‘still’ rely on debit cards for large-sized purchases, as per data by Worldline’s India Digital Payments Report. The average ticket size (ATS) of debit cards grew by 24% year-on-year to ₹2,642 in the second half of 2023, the data says.

In fact, most of the growth seen in the cards business, which also includes credit and prepaid cards, was driven by debit cards. The number of debit cards in circulation is 960.8 million, which showed a miniscule growth of 2% YoY.

“The growth in debit card ATS suggests that while debit card transactions volume fell, there was still a significant population that used debit cards for their purchases and that ensured that transactions value did not fall parallelly,” says Worldline.

Debit card volumes are now a fraction of UPI transactions at 1.15 billion in H2 in 2023 — a drop of 34% YoY. Debit card transaction value at ₹3.02 lakh crore also saw a fall of 16%.

In India, UPI rules

On the other hand, UPI’s ATS also fell, but that too is a sign of growth, as people seem to use it even for small transactions. Its ATS declined 8% YoY to ₹1,515 from ₹1,648.

“The ATS persistently follows a downward trend, indicating a more profound integration of UPI, particularly in smaller or micro-transactions. This decline is predominantly propelled by the surge in person-to-merchant (P2M) transactions,” said Worldline.

This decline, however, is related to an extensive growth in UPI transactions. As of the second half of 2023, as much as ₹99.68 lakh crore flowed via phones —exhibiting a whopping 44% surge.

The volumes grew 56% YoY to 65.77 billion in H2 in 2023. Between July 2022 and December 2023, there was a notable increase in the payment acceptance infrastructure channels. Point of Sale (PoS) terminals expanded by 26%, dominated by private sector banks with a 73% market share.

“This trend underscores users' growing confidence and familiarity with smartphone-based payment methods. The proliferation of Point of Sale terminals has reached unprecedented levels, concurrent with the ascendance of mobile payments as a dominant transaction avenue,” said Ramesh Narasimhan, CEO- India, Worldline.

While UPI is rising fast ahead of debit cards, credit cards tell another story of growth. Not only did credit card issuances rise a strong 21%, but credit card transaction value rose 11% to ₹9.39 lakh crore. The number of credit card transactions also grew by a healthy 30.5% — indicating the rising popularity of buy now pay later trends, both online and offline.