Estimate the total # of annual UPI transactions in INDIA.

Guesstimate pathways

# of annual UPI transactions in INDIA

UPI aka Universal Payment Interface

TYPES OF TRANSACTIONS:-

1. Peer to Peer (P2P)

2. Peer to Business (P2B)

3. Business to Business (B2B)

   Here we will only consider the transactions which include peer i.e P2P & P2B.

A rough approach to this problem will look like this, where
# Total Annual UPI transaction = # of eligible users * # of annual UPI transactions per person.

• In our 1st step let’s look into the process to find the eligible people or eligible UPI users in India.
  For this let’s say,
  The population of India = 1.4 bn
  Now, let’s divide these into three basic age groups i.e.,
  (<18: 30% ) + (18 - 60: 55%) + (>60: 15%)

  Assumption - The # of UPI users will be from 2nd age group i.e 18-60

  So, the population in the 18 - 60 age group is approx. 800 mn people.
  
  OUR NEXT DIVISION would be based on economy i.e rural and urban
  In our case let’s say ( RURAL - 70% or 560 mn ) & (URBAN - 30% or 240 mn)
  
  Our Next division will be based on Smartphone users & penetration of the internet. Here, I am considering both categories as one. Since, if one is having a smartphone, he will have access to the internet.
  ( RURAL: 30% or ~170 mn ) & ( URBAN: 90% or ~220 mn) NET = ~390 mn

  Further moving ahead, since if one is doing a UPI transaction he/she must be having access to the bank account. So, Our next criteria will be bank account access.
  Now, all of them don't need to have bank account access. But still, I will go with a higher percentage
  Bank account access: 80% overall or ~310 mn.
  The 2nd last assumption will be UPI penetration say 60% or ~190 mn people. This is based on various factors like accessibility, knowledge, etc.
  The final criteria which I would like to consider are for a person to have multiple UPI’s, this percentage will be less certain but we can’t ignore it.
  Say, out of 190 mn people approx. 5% will have another UPI with them
  which makes final # = 190+5% of 190 = ~200 mn.

  (So, the # of UPI users in INDIA comes out to be ~200 million)

  ---

• Our 2nd step would be to find # of annual UPI transactions per user.
  While proceeding further, Certain assumptions and figures will have to be mentioned, while discussing with the interviewers, before putting it in a formula.

  • The transactions which I am taking are weekly based, and I am considering those numbers to be the same for all 12 months so, I am taking only one month into consideration, then it will be multiplied by 12.
    Now, here you need to consider one thing, that if the interviewer asks you to take a more accurate approach, that would be quarterly based or on a 6-month basis.
    So, you need to keep talking to an interviewer, so that you can proceed in the way he wants you to.

  • There is one more factor that might come into play, if a year is mentioned say, 2020
    then you will have to go with the quarterly approach and you will have to consider the lockdown period too which drastically affected normal daily life.

  • First things first, the division would be based on the income groups which are lower class (LC), Lower Middle Class (LMC), Middle Class (MC), Upper Middle Class (UMC), Upper Class (HC). Their distribution is shown below in the image.

  • Next since we were considering two different transactions P2P & P2B. So, we will have certain sections of transactions being divided into.
    These will be P2P, Staple, Discretionary.

    • P2P transactions include all that involve only peers.

    • The staple will consist of all the different things that are essential to one which is bought from groceries, shops, etc.

    • Discretionary products will consist of non-essential product which doesn’t play much of a role in below middle-class peoples.

  • All these categories are shown below in the figure

    

    Distribution of transactions per week for different classes in a month

  • The above transactions are based on the frequency and total transactions one can make in total.
    So, as you see for UMC+HC the frequency of UPI transactions will be more, For the middle class less than UMC, and for LMC and below, it will be the least.

• Formula: - {sum of (Total*class division)}*4*12
  Thus final amount will be: (2*0.2+3.5*0.6+6*0.2)*4*12 = ~180

  So the # of total UPI transactions per users annualy is ~ 180

 # Transaction/annum = # UPI users * # transaction/user/annum
# Transaction/annum = ~200 million * ~180 = ~36 billion

Total # UPI transactions in INDIA in a year is ~36 billion.