Telangana tops States in UPI transaction intensity: RBI paper, Pg7

Key Highlights:

• Telangana leads all states in UPI transaction intensity, measured by per capita volume, according to an RBI paper.
• Karnataka, Andhra Pradesh, Delhi, and Maharashtra also show high UPI usage intensity.
• UPI's rise is likely a major factor driving the decline in cash demand in the economy.
• PhonePe data, accounting for 58% of total UPI transaction volume, was used as a proxy to assess UPI intensity.

Detailed Insights:

• The rise of UPI is reflected in the steady fall in ATM cash withdrawals as a percentage of GDP, indicating a shift in payment preferences.
• The growing use of UPI for low-value, everyday transactions is evident in the rising share of peer-to-merchant (P2M) payments.
• The average value of a single UPI transaction has been declining over time, with the bulk of P2M transactions falling within the sub-₹500 value range.
• High UPI usage intensity in southern and western states, and in Delhi, is attributed to urban centers, economic hubs, and employment-driven migration.
• Cash withdrawal intensity remains higher in many northeastern states, as well as in Kerala and Goa, potentially due to tourism, remittance inflows, and limited digital infrastructure.

Key Concepts Involved:

• UPI (Unified Payments Interface): A real-time payment system that facilitates instant fund transfers between two bank accounts on a mobile platform.
• P2M (Peer-to-Merchant): Transactions where payments are made from individuals to merchants for goods or services using digital payment methods.
• Cash Withdrawal Intensity: The rate at which cash is withdrawn from ATMs relative to the economic activity in a particular region.