How did Indians spend money in the second half of 2023?

Spending trends exposed: In the latter half of 2023, the most visited categories of physical stores in India were grocery stores, restaurants, service stations, clothing stores, government services, pharmacies, and hospitals. Together, these categories accounted for about 65 per cent of transaction volume and nearly 50 per cent of the total transaction value. In the online realm, e-commerce, gaming, utilities, government services, and financial services constituted approximately 80 per cent of the total transaction volume and about 74 per cent of the total transaction value.

The top 10 states and union territories with the highest number of transactions at physical locations in 2023 were Maharashtra, Kerala, Tamil Nadu, Karnataka, Delhi, Telangana, Uttar Pradesh, Gujarat, Jharkhand, and West Bengal.

Rise in payment infrastructure

Payment acceptance infrastructure witnessed an uptick during the period between July and December 2023. Point of Sale (PoS) terminals increased by 26 per cent to 8.56 million, while Bharat QR (BQR) codes grew by 32 per cent to 5.96 million. Notably, UPI QR codes saw growth of 57 per cent to reach 317 million. This surge in UPI QR code usage also correlates with the increase in UPI transactions.

Private sector banks dominated the PoS market, accounting for 73 per cent of the market share, while public sector banks held 18 per cent. Payment banks and foreign banks had 8 per cent and 1 per cent market shares, respectively.

The UPI preference

Unified Payments Interface (UPI) remained the preferred payment option, witnessing a substantial increase in transaction volume from 8.03 billion in January 2023 to 12.02 billion in December 2023. The transaction value also rose from Rs 12.98 trillion to Rs 18.22 trillion during the same period.

Comparing the volume of UPI transactions in the second half of 2023 to the same period in 2022, there was a 56 per cent increase from 42.09 billion to 65.77 billion transactions. However, the average transaction size decreased by 8 per cent from Rs 1648 in the second half of 2022 to Rs 1515 in the second half of 2023. This reduction suggests a shift towards smaller or micro transactions, primarily driven by the growth in person-to-merchant transactions.