Zeta, a leading banking tech unicorn, has forecasted a monumental rise in the value of transactions via Unified Payments Interface (UPI) credit lines, predicting that they could exceed US$ 1 trillion by 2030. Since its introduction in August 2016, UPI has revolutionized digital payments in India, rapidly growing in popularity and usage. Within just over three years of its launch, UPI had already reached 1 billion monthly transactions, and as of April 2024, it recorded a staggering 13 billion transactions. Zeta's projections for UPI credit lines are rooted in the substantial adoption rates observed since its inception, with UPI credit lines now poised to outpace other traditional on-demand credit products such as overdrafts and credit cards.

Three primary factors are expected to drive this growth: the increasing demand for credit, a shift toward digital payments, and significant advancements in credit discovery, activation, and utilization. Despite India's credit-to-GDP ratio being only 40%—one of the lowest among emerging markets—there is a burgeoning demand for credit, especially in Tier 2 and rural areas. However, banks often struggle to service these areas effectively due to limited visibility and reach. In such regions, a large proportion of new credit originations—approximately 60%—are already taking place, signaling a clear opportunity for expansion.

The digital payments ecosystem in India is also rapidly evolving. Currently, 45% of household spending is digital, involving payment methods such as credit cards, debit cards, person-to-merchant (P2M) UPI transfers, net banking, and financing options. As digital adoption continues to grow, Zeta estimates that 40% of P2M transactions could potentially shift from direct bank debits to UPI-based credit lines. This shift is anticipated to contribute significantly to the overall increase in UPI volumes, with P2M transactions projected to constitute 75% of UPI volumes by 2025, amounting to nearly US$ 2.5 trillion by 2030.

A crucial aspect of Zeta's forecast is the credit eligibility landscape in India. Out of 800 million credit-eligible individuals, only 180 million are currently credit-served, leaving a vast majority either completely unserved (400 million), underserved (160 million), or new to credit (60 million). This represents a significant untapped market, where UPI credit lines could play a pivotal role. Zeta emphasizes that UPI credit lines provide banks with access to alternative data sources that can be used to assess creditworthiness, thereby helping to bridge the gap between the credit-served and unserved populations.

Moreover, UPI's interoperability with various repayment modes offers additional benefits, such as reducing the costs associated with managing offline payment channels and potentially lowering default rates. This interoperability ensures that UPI credit lines are not only accessible but also convenient for a wide range of users, from the tech-savvy urban population to those in more remote areas.

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Zeta's insights also shed light on the behavioral shifts among Indian consumers regarding credit usage. With the rise of digital banking and fintech innovations, there is a clear trend towards instant access to credit via digital platforms. UPI credit lines, which offer instant access to credit for 80% of pre-approved, inactive credit customers on the UPI network, are well-positioned to cater to this demand. Unlike traditional credit products, UPI credit lines are expected to become the preferred choice for consumers due to their ease of use and integration with existing UPI services.

Another significant development highlighted by Zeta is the potential for UPI credit lines to transform the landscape of P2M transactions. As digital payments become increasingly prevalent, the shift from bank debits to UPI-based credit is anticipated to drive substantial growth in UPI transaction volumes. Zeta estimates that by 2030, P2M transactions alone could represent 75% of total UPI volumes, further solidifying UPI's position as a dominant force in India's payment ecosystem.

The potential for UPI credit lines to surpass US$ 1 trillion in transaction value by 2030 is also tied to the broader trends in financial inclusion and digital penetration across India. As more individuals gain access to credit through UPI, especially in underbanked and rural areas, the overall impact on the economy could be transformative. Zeta's forecast suggests that as credit discovery and utilization improve, the financial system will become more inclusive, catering to a broader segment of the population.

In conclusion, Zeta's projections paint a promising picture of the future of UPI credit lines in India. With the potential to exceed US$ 1 trillion in transaction value by 2030, driven by factors such as increasing credit demand, digital payment adoption, and advancements in fintech. The UPI credit ecosystem is set to play a crucial role in shaping the future of India's financial landscape. As banks, fintech companies, and consumers continue to embrace UPI-based credit solutions, the road ahead looks bright, with opportunities for innovation and growth that could redefine the way credit is accessed and utilized across the country.

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