The Unified Payments Interface (UPI) has emerged as the leading payment method in India, outpacing credit cards with an impressive 75% compound annual growth rate (CAGR) in transactions and a 68% CAGR in spending from August 2019 to August 2024, according to a report by Axis Securities. This growth underscores a significant shift in consumer preferences as UPI transactions now represent 38.4 times the volume of credit card transactions.

UPI is particularly favored for lower-value payments, with 96% of all transactions being under Rs 2,000. However, this segment only accounted for 33% of total UPI spending as of August. Despite the high transaction volume, the ratio of UPI to credit card spending remains low at 0.3 times, indicating a stable pattern in spending behaviors.

In the credit card sector, net card additions rose to 924,000 in August, up from 755,000 in July. Nonetheless, this marks a sharp decline of 34% year-on-year, reflecting cautious lending practices among issuers amid concerns about asset quality. For the first five months of FY25, the industry added 3.7 million cards, a decrease from 6 million during the same period last year.

The report also highlights a notable decline in debit card usage, with transaction volumes and spending decreasing by 20% and 6% CAGR, respectively, over the same period. In contrast, private banks have outperformed public and foreign banks in customer acquisition, adding 583,000 new customers in August, which accounted for 63% of total industry additions.

With the festive season approaching, analysts expect a resurgence in growth momentum across the payment landscape as consumer spending is likely to increase.