Digital merchant payments dipped 0.8% in September to ₹11.4 trillion due to a shifting festive calendar. While debit card usage continues to decline, analysts at Equirus Securities anticipate a recovery in October and November as peak consumer spending arrives.
Indian digital merchant payments witnessed a minor contraction in September, with total transactions falling 0.8% month-on-month to ₹11.4 trillion. Analysts at Equirus Securities view this dip as a timing mismatch rather than a decline in consumer demand, largely due to the festive calendar shifting in 2026. With major festivals like Diwali falling later, the anticipated surge in spending is expected to show in the October and November data.
UPI continues to maintain its strong hold on the digital payment ecosystem, capturing 77.6% of the market share in September. Despite monthly fluctuations, the year-on-year growth for UPI P2M (person-to-merchant) transactions stood at a robust 23.3%. This dominance highlights the ongoing migration of small-ticket transactions from cash to UPI. While UPI is growing, the card segment shows a contrasting trend.
Credit card spending totaled ₹2.04 trillion in September, marking a 5.9% decline compared to the previous year. Debit cards are facing even steeper pressure, falling 7.3% month-on-month and 7.6% year-on-year. This trend suggests that consumers are increasingly favoring UPI for daily routine spending, while reserving credit cards for specific high-value purchases. E-commerce platforms remain the primary utility for credit cards, accounting for nearly 62% of total spend, with an average expenditure of ₹10,061 per card compared to ₹6,204 at physical stores.
For investors, the resilience of UPI transaction volumes serves as an indicator of digital consumption health. However, the slowing growth in credit card spending is a metric to track, particularly for lenders that depend on card-based fee income. While the festive season is expected to provide a short-term volume boost, investors may watch for potential impacts from regulatory oversight on unsecured lending, which includes credit cards. Furthermore, as consumers shift toward low-cost UPI instruments, the ability of financial institutions to maintain profit margins on payment processing will remain a factor to monitor. The coming months will clarify whether this current slowdown is a temporary result of the festive calendar shift or a broader change in how households manage their budgets during the year-end season.