PhonePe Data Gives A Peek Into Digital Payment Trends

The reality may surprise you.

With deeper penetration of smartphones across India and the pandemic forcing fewer in-person interactions, the base of digital transactions is widening—in terms of geography and usage.

PhonePe, India's largest digital payment platform and a leader in UPI-based payments, opened up its data warehouse to the public this week, providing a peek into emerging trends. While the data is based on transactions on PhonePe alone, it's directionally relevant for the industry as well.

According to PhonePe, nearly 80% of its monthly active users came from Tier-2, Tier-3 cities and beyond.

• 18.1% of monthly active users on the platform reside in Tier-1 cities.

• 15.9% live in Tier-2 cities.

• 65.9% of active users are in Tier-3 cities and beyond.

The transacting patterns across users differs between larger and smaller cities. In Tier-1 cities, merchant payments now make up more than 50% of all transactions on the platform. In Tier-2 and Tier-3 cities, peer-to-peer payments still dominate.

Overall, in the quarter ended June, PhonePe recorded 394 crore digital transactions. Of these, 174 crore, or 44%, were P2P in nature. Payments to merchants constituted 150 crore transactions, while recharges and bill payments comprised 68.5 crore transactions. Financial services and others made up the rest.

While Maharashtra leads the pack in absolute number of digital transactions across states, Karnataka and Telangana aren't far behind at number two and three.

Other major states with high digital transactions include Andhra Pradesh, Rajasthan, Uttar Pradesh and Madhya Pradesh. Bihar ranked a step above Tamil Nadu in number of digital transactions in the quarter ended June, the report shows.

The top five districts leading offline merchant transactions include Bengaluru, Nashik, Aurangabad, Vishakhapatnam and Rangareddy District in Telangana.

The overall of digital transactions is rising rapidly. From Rs 2.64 lakh crore worth of digital transactions in April-June 2020, the of payments on the PhonePe platform has risen to nearly Rs 7.5 lakh crore in April-June this year. A growth of nearly three times in a year.

While recharges and bill payments constitute a smaller share of total transactions, they have been on the rise because of the pandemic.

"Since stores offering mobile top-ups were shut due to state-level lockdowns, more users traditionally recharging offline moved to online recharges," PhonePe said in the accompanying report.

The number of prepaid mobile recharges rose 51% year-on-year in the quarter ended June. A higher number of users also used the PhonePe application to recharge their direct-to-home service in April and May 2021, possibly because of sporting events being broadcast.

The number of bill payment transactions in the April-June quarter, too, rose 85% from a year ago. Among specific categories, electricity bill payments were the largest, as all 73 electricity boards in the country offer online transactions.

Financial services have seen rapid traction across Tier-2, Tier-3 cities and beyond on PhonePe, with many first time investors and insurance buyers, the report said. Close to two-thirds of PhonePe’s insurance offering is largely purchased from customers in Tier-3 cities and beyond.

Apart from mutual funds and insurance, Indians also bought more gold on the digital transaction application during the pandemic. Gold purchases on the PhonePe application saw a rise during festivals like Rakshabandhan, Deepawali and Dhanteras. Most of these buyers were from smaller cities as well, the report said.