印度国际经济关系研究委员会-数字支付在印度的扩散-基于PhonePe Pulse数据的见解（英）

1

WORKING

PAPER

DIFFUSIONOFDIGITAL

PAYMENTSININDIA-

INSIGHTSBASEDON

DATAFROMPHONEPE

PULSE

MARCH2024

Abstract

Digitalisationofpaymentsisaglobaltrend,withtheCOVID-19pandemichavingtriggeredacceleratedadoption.WhileIndiahasbeenattheforefrontofthistransition,thereislittleunderstandingofhowtheUnifiedPaymentsInterface(UPI),India’sreal-timedigitalpaymentsystem,hasdiffusedandtheextentofitsinclusivescalingwithinthecountry.ThepaperreliesonstateanddistrictleveldatafromPhonePe,thelargestdigitalpaymentsplatforminIndia,tobetterunderstandtheheterogeneityinpatternsofdiffusionacrossstatesanddistrictsofIndia.Datafromvariousothersourcesareusedtoexaminehowsocio-economicfactorscorrelatewithdiffusion.

Theinitialperiodsbeginning2018aremarkedwithafewearly-adopterdistrictsthathavehighlevelsofuserpenetration.TheCOVID-19pandemicappearstohavecatalysedlarge-scaleadoptionthatresultedinlowervariationinuserpenetrationacrossdistrictsandstates.Regionsthatstartedoffwell,continuetolead,withlittlereorderingintherankingofdistrictorstates.Foraspirationaldistrictsuserpenetrationcontinuestoremainrelativelylower.Findingsfromcross-sectionalregressionssuggestthatsocio-economicindicatorssuchascertainlevelsofincome,poverty,education,digitalliteracy,andfinancialaccessarenecessarybutnotsufficientforwidespreadadoption.Policyeffortsthereforerequireadeeperunderstandingofthecostsandbenefitsofdigitalpaymentstodifferentusers,andamulti-prongedapproachtopromoteitsadoptioninwaythatisbeneficial.

Keywords:DigitalPayments,FinancialInclusion,FinancialInstitutionsandServices

JELclassification:G20,O16,O13

Authors’email:mkedia@icrier.res.in;areddy@icrier.res.in;sshukla@icrier.res.in

Acknowledgement

WearegratefultoPhonePeforsupportingtheuseoftheirdataforthispaperandforclarifyingallourquestionsrelatingtotheavailableindicators.WearegratefultoDeepakMishra,ArpitaMukherjee,ManishGoel,HavishayePuri,SaptorshiGupta,andotherresearchstaffatICRIERfortheirfeedbackonthereport.WewouldalsoliketothankNishantChadha,RohitPrasadandDileepKumarfortheirdetailedreviewofthepaperandtheircommentsthatsignificantlyhelpedimproveanearlierdraftofthepaper.Allerrorsremainourown.

Disclaimer:Opinionsandrecommendationsinthereportareexclusivelyoftheauthor(s)andnotofanyotherindividualorinstitution.Thispolicybriefhasbeenpreparedingoodfaithonthebasisofinformationavailableonthedateofpublication.Allinteractionsandtransactionswithsponsorsandtheirrepresentativeshavebeentransparentandconductedinanopen,honestandindependentmanner.

CONTENTS

1.TheGlobalSurgeinUseofDigitalPayments

1

2.DataandMethodology

4

3.StylisedFactsonDiffusionofDigitalPayments

3

4.AreStatesandDistrictsConverginginAdoptionofUPI?

4

5.Socio-economicfactorsdrivingUPIdiffusion

13

6.Conclusion

21

Keypolicytakeaways

21

References

23

Appendices

26

ListofTables

Table1:DataSourcesotherthanPhonePePulse

6

Table2:Understandingσ(sigma)andγ(gamma)convergence

10

ListofFigures

Figure1:GrowthinNumberofUniqueUPIusers

2

Figure2:UPIvis-a-visdigitalpayments

3

Figure3:GrowthinUPITransactions

7

Figure4:TransactionVolumeandValueforPhonePehavebeengrowingatasteeperratethan

registeredusers

7

Figure5:Stateswithhighinitialvaluetendtoremainontop

8

Figure6:Userpenetrationandeconomicprosperity

9

Figure7:AspirationaldistrictscontinuetolagbehindinUPIadoption

10

Figure8:Convergenceanalysisatthestate-level

11

Figure9:Convergenceanalysisatthedistrictlevel

12

Figure10:Convergenceanalysisforaspirationaldistricts

12

Figure11:RegressionResultsforUserPenetration(2022Q4)

14

Figure12:Socio-economicconditionsthatmaybenecessarybutarenotsufficientfor

diffusion(DistrictlevelscatterplotsofPhonePeUserPenetrationandsocio-economic

factors-2022Q4)

15

Figure13:ComparisonofRegressionResultsforVariousSocio-EconomicIndicators(2022Q4)17

Figure14:ComparisonofRegressionResultsforVariousMeasuresofAdoption(2022Q4)--18

Figure15:ComparisonofRegressionResultsOverTime(2022Q4vs.2018Q4)19

Figure16:ComparisonofScatterplotsovertime(2022Q4vs.2018Q4)20

DiffusionofDigitalPaymentsinIndia-InsightsbasedondatafromPhonePePulse

AartiReddy,MansiKediaandSanjanaShukla

1.TheGlobalSurgeinUseofDigitalPayments

Digitalisationofpaymentsisaglobaltrend.AccordingtotheWorldBank’sFindex,theshareofadultsmakingorreceivingdigitalpaymentsindevelopingcountriesincreasedfrom35percentin2014to57percentin20211.TheCOVID-19pandemicwasoneofthekeydriversofaccelerateddigitaladoption.However,theBankforInternationalSettlements(BIS)statedinitsrecentpublicationthatdespitestronggrowthinthevolumeandvalueofreal-timedigitalpayments,theyhavenotreplacedcash2.

Shiftingpaymentsfromcashtodigital,hasthepotentialtolowerthecostsoftransactions,andimprovetransparency,traceability,security,andfinancialinclusion.Digitalpaymentsareparticularlyhelpfulinenablingtransactionsincontextslikethepandemicwhenlimitingphysicalinteractionwasessential.Theyhavealsotransformedthenatureoftransactionsbetweenbuyersandsellers,andthedisbursementofwages,welfarepayments,pensions,andsocialprotectionbenefits.Theyhavealsoresultedinhighercostefficienciesforthebankingsector3.Inthelongrun,infrastructurefordigitalpaymentscanalsofacilitatedigitalprovisioningofotherimportantservicessuchascredit,savings,remittances,andinsurance,whichareimportantattributesofthequalityoffinancialinclusion4.

Ontheflipside,digitalpaymentscomewith

theriskofsecuritybreachesandlossofprivacy,

uncertaintydrivenbynetworkfailuresand

technicalglitches,andtherefore,canpotentially

deepenfinancialdivides.Inadequatefocuson

theseaspectscanlowerbenefitsfortheecosystem

andresultincounterproductiveoutcomes.

FastPaymentsSystemsaredrivingthegrowth

ofdigitalpaymentsacrosstheworld.Theseare

systemsinwhichthetransmissionofthepayment

messagesandavailabilityoffinalfundstothe

payeeoccurinrealtimeornear-realtime,andas

nearto24hoursaday,sevendaysaweek(24/7).

Thetechnologyunderlyingmanyfastsystems

enablenewandinnovativefunctionalitiesforend

userswhichhavebeenkeyindrivingtheirrapid

adoption5.ManyCentralBankshaveinvestedina

fastpaymentssystemthatisintegratedwiththeir

nationalpaymentssystem.ThisincludesIndia’s

ImmediatePaymentService(IMPS),China’s

InternetBankingPaymentSystem(IBPS),and

Singapore’sFastandSecureTransfers(FAST).

Overaperiodoftime,countrieshavebuilt

interoperablepaymentnetworksatopthesefast

(real-time)paymentnetworkstoalsofacilitate

retaildigitalpayments.Thesearenowcommonly

referredtoasDigitalPublicInfrastructurefor

Payments6.ExamplesincludeIndia’sUnified

PaymentsInterface(UPI),Thailand’sPromptPay,

Brazil’sPiX,Philippine’s’Instapay,andSingapore’s

PayNow.

1

/en/publication/globalfindex/Report

2

/statistics/payment

_stats/commentary2301.htm.

3Saroyetal.(2023)

4

/profile/Rajesh-Kumar-122/publication/333369877

_DIGITAL_FINANCIAL_SERVICES_IN_INDIA_AN_ANALYSIS_OF_TRENDS_IN_DIGITAL_PAYMENT/links/5eb654fca6fdcc1f1dcafcd8/DIGITAL-FINANCIAL-SERVICES-IN-INDIA-AN-ANALYSIS-OF-TRENDS-IN-DIGITAL-PAYMENT.pdf

5

/cpmi/publ/d154.pdf

;

/sites/default/files/2021-11/Fast%20Payment%20Flagship

_Final_Nov%201.pdf

6

/pdf/State

ofIndia_Digital_Economy_Report_2023.pdf;

/curated/en/099755004072288910/pdf/

P1715920edb5990d60b83e037f756213782.pdf

1

Indiaisattheforefrontofthistransformation,withthehighestvolumeofdigitalpaymentsintheworld.Over45%ofallglobalreal-timedigitaltransactionsarenowinIndia(ACI,2023).TheUnifiedPaymentsInterface(UPI),introducedbytheNationalPaymentsCorporationofIndia(NPCI)in2016,isamongthefundamentaldriversofthisgrowth.UPIhasseenrapidgrowthfromapproximately3croreuniquecustomersin2017

toover33croresaccordingtothelatestreported

data–whichamountstoapproximately24%of

theIndianpopulation(Figure1).Startingwith

only21banksin2016,ithasnowexpandedto

includeover550banksand22thirdpartyapps7.

TheUPInetworkiscurrentlydrivenbynon-bank

digitalpaymentcompanies,whichaccountfor

morethan80percentoftransactions8.

Figure1:GrowthinNumberofUniqueUPIusers

35

25

15

10

5

0

35

8

3

Mar2017Mar2018Mar2019Mar2020Mar2021Mar2022Mar2023

Source:RiseofNewEraofDigitalPaymentsReport(MinistryofI&B)and

.in/FeaturesDeatils

.aspx?NoteId=151350&ModuleId%20=%202

UPIisasubsetofdigitalpaymentsthatincludesotherretailinstrumentssuchascards,banktransfers,andmobilemoney.WhileUPItransactionscomprisedonly3%ofthevalueofdigitalpaymentsin2020-21,itaccountedformorethanhalfthenumberoftransactions(Figure2)9.Itenablesthedigitalprocessingofsmallvalue

transactionswithoutincurringthehighcostsof

alternativemethodssuchasdebitcardsandbank

transfers.Criticsoftenpointtowardsthisasa

negative–i.e.,overloadinganetworkwithtoo

manylowticket-sizedtransactions,thatcould

havebeenclearedincashatalowercosttothe

network.

7

.in/what-we-do/upi/product-statistics

;

/features/record-breaking-numbers-upi-2022-hint-india-maturing-digital

-payments-ecosystem/

8UPIEcosystemStatistics(June2022),NPCI.

.in/what-we-do/upi/upi-ecosystem-statistics

9MinistryofInformationandBroadcasting,GovernmentofIndia(2022).RiseofaNewEraofDigitalPayments.RetrievedonFebruary10,2023fromhttps://.in/WriteReadData/specificdocs/documents/2022/nov/doc20221116125801.pdf

2

Figure2:UPIvis-a-visdigitalpayments

Figure2a:Valueoftransactions

3,000

2,500

2,000

1,500

1,000

500

0

2017-182018-192019-202020-212021-22

Figure2b:Numberoftransactions

10,000

9,000

8,000

7,000

6,000

5,000

4,000

3,000

2,000

1,000

0

2017-182018-192019-202020-212021-22

Source:PIB(fromRBI,NPCIandBanks)NCPIandPhonePePulse.

AnumberofstudieshavedocumentedtherapidadoptionofdigitalpaymentsinIndiaandacrosstheworld,thoughfewfocusonhowitwasdistributedandhowinclusiveitis.

Moststudiesexaminetheadoptionofdigital

paymentsduringandafterthedemonetisation

of2016andtheCOVID-19pandemic(Singhet

al.,2022;Kumaretal.,2019;Bhasinetal.,2018).

Chodorow-Reichetal.(2020)foundthatdistricts

experiencingmoreseveredemonetizationwere

10

.in/PressReleasePage.aspx?PRID=1897272

3

alsooneswithreducedeconomicactivityandlowerbankcreditgrowth,butrelativelyfasteradoptionofalternativepaymenttechnologies.Lahiri(2020)foundthatareasthatwereinformalandnotveryintegratedwiththeformalfinancialnetworkwereunlikelytoadoptdigitizationinresponsetoashocklikedemonetization,suggestinganon-inclusivepatternofadoption.Whilethefindingsregardingtheeffectofdemonetizationonadoptionhasbeenmixed,studieshavefoundthatthepandemicgenerallyacceleratedadoption.ThelackofempiricalworkispartlybecausedatareportedbyNPCIonUPIisfortransactions(byvolume,value,entity)andnotadequatelyavailableforusers.WhileUPIhasreportedlygainedtractioninTier2and3cities11,thepoorerarefoundtobelesslikelytouseitthanthericher.AsurveybyNPCIfindsthatthebottom40percentofthepopulationishalfaslikelyasthetop20percenttousedigitalpayments12.Low-incomehouseholdsthatdousedigitalpayments,however,aremorelikelytouseappssuchasPaytmandPhonePethancreditcards,debitcards,andbankapps,comparedtohigherincomehouseholds.A2022OxfamreportbasedonCMIEdata,reportsamuchwidergap-withtherichest60percentbeingfourtimesmorelikelytomakeadigitalpaymentthanthepoorest40percent13.

Asystematicandmacrounderstandingofthepatternsofdiffusionatthesub-nationallevelismissing.Whilepromotingdigitaltransactionsisnotagoalinitself,itspotentialbenefitshavemadeitanintermediateindicatorofinterest.Further,understandingitsdiffusionpatternsisessentialtopreventexclusionofmarginalizedgroupsasdigitalpaymentsbecomethenormandstartreplacingnon-digitalalternatives.This

paperpresentsananalysisofUPIdiffusionin

Indiawiththepurposeofunderstandinghow

inclusiveithasbeen.Thenextsectiondescribes

thedatausedandthemethodologyforthe

overallanalysis.SectionIIIpresentadescriptive

analysisoftrendsovertime,andacrossstates

anddistricts.Thisisfollowedbyaconvergence

analysisofdiffusionusingthesigmameasureof

dispersionandthegammameasureofranking

inSectionIV.SectionVdiscussestheresultsof

cross-sectionalregressionsthatexplaindriversof

digitalpaymentsinIndiaandsomereasonsfor

non-inclusivediffusion.SectionVIconcludes.

pushtowardsdigitalizationhasledtoadramatic

riseininternetpenetrationinIndia.

2.DataandMethodology

ThepaperreliesondatafromPhonePe,thelargest

digitalpaymentsplatforminIndia,withalmost

50percentmarketshareintermsofvolume

andvalueoftransactions(Figure17,Appendix

1).Thedatacoversadoptionbyindividualas

wellasmerchantusers.Itprovidesnumberof

users,numberofappopens,volume(numberof

transactions),andvalueoftransactionsforeach

quarterbetweenthefirstquarterof2018andthe

fourthquarterof2022.

Thenumberofusersrefersto‘registeredusers’,

definedasuniquemobilephonenumbersthat

havedownloadedthePhonePeappandaccepted

theTermsandConditionsdisplayedduringthe

onboardingprocess.Whilethisisameasureof

adoption,itdoesnotimplyactiveusageoftheapp.

Thenumberoftransactionsperpersonprovides

abettermeasureofactiveusage.Inthepaperwe

assessdiffusionusingfourdifferentindicators

1)userpenetration(numberofregisteredusers

11BCGandPhonePePulse(2022).DigitalPaymentsinIndia:AUS$10TrillionOpportunity.RetrievedonFebruary10,2023from

/pulse

-static-api/v1/static/docs/PhonePe_Pulse_BCG_report.pdf

12NPCI(2020).DigitalPaymentsAdoptioninIndia.RetrievedonJanurary262023from:

.in/PDF/npci/knowledge-center/Digital-Payment

-Adoption-in-India-2020.pdf

13Oxfam(2022).IndiaInequalityReport2022:DigitalDivide.RetrievedonJanuary262023from:

https://www.oxfamindia.org/knowledgehub/workingpaper/

india-inequality-report-2022-digital-divide

4

percapita)2)averagenumberoftransactionspercapita3)averagevalueoftransactionspercapitaand4)ticketsize(averagevalueofeachtransaction).Whilethevalueoftransactionspercapitaandticketsizearenotnecessarilymeasuresofhowactivelydigitalpaymentsarebeingused,however,theycanbeinformativeinunderstandingthetypesoftransactionsasystemlikethisisfacilitating,anditsimpactsonefficiencyandoveralleconomicactivity.Dataontheactualdistributionoftransactionvaluesand

socio-economicindicatorsratherthanaverageswouldprovidemoreinsightsonhowdifferentgroupsofthepopulationareleveragingdigitalpayments.

AccordingtoNPCIthelatestreportednumberofuniqueUPIuserswasover33croresinMarch202314whilePhonePereportedover49.14croreregisteredusersinSeptember202315.ThecorrespondingnumberforMarch2023is45.38crore.MostUPIusershaveaccountsonmultiplepaymentapps,sothenumberofactivePhonePeuserswouldlikelybeclosetotheNPCIestimateofactiveUPIuserseventhoughPhonePe’smarketshareintermsofvolumeandvalueisabout50%.WhiletheNPCIestimateservesasabenchmark,theirnumbersarealsoestimatesandaresubjecttosomedegreeofuncertainty.TheremayalsobedifferencesinhowusersaredefinedbyUPIandPhonePe,givingrisetodifferentestimates.GiventhescaleofPhonePe’snetwork,wepresentourfindingsassumingthattrendsforPhonePeadoptionarerepresentativeoftrendsinUPIasawhole.Theremay,however,beuniqueusersforotherpaymentappssuchasPaytmorBHIM,thatcanlimitthegeneralizabilityofthesefindings,

especiallyintheearlyyearsofourdataset(the

marketshareofPhonePewas~30%in2018-

19–seeAppendix1).Butwedon’texpectitto

systematicallyaffectthebroaderfindings.

Theanalysishasbeencarriedoutbothatthe

stateanddistrictlevels.Table1showsthe

othersourcesofdatausedtoexaminehow

regional,demographic,andsocio-economic

factorscorrelatewithadoption.Indicatorsused

includepopulation,income,wealth,poverty

rate,literacyrate,accesstomobilephonesand

theinternet,digitalliteracy,andmeasuresof

financialinclusion.Densityofbankbranchesis

usedasaproxytoexaminehowphysicalfinancial

infrastructuremediatestheadoptionofdigital

payments(especiallyconsequentialinrural

areas),andwhetherdigitalpaymentappssaw

greateruptakeinareasthatwerehardtoreach

forthetraditionalbankingsystem.Whiledata

onsmartphoneownershipwasnotavailable,itis

expectedtobeanimportantpredictor.TableA1,

Appendix2providesdescriptivestatisticsforthe

variablesused.

Inordertocompareindicatorslikethenumber

ofregisteredusers,numberoftransactions,and

transactionamount,wenormalisethedataby

population.Whereunavailable,thepopulation

dataislinearlyinterpolatedtoobtainquarterly

data.Atthestatelevel,thepopulationdatais

sourcedfromtheMinistryofFamilyHealthand

Welfare’s2019projectionsfortheyears2018to

2022.Atthedistrictlevel,weusethepopulation

projectionsbytheUSCensusBureautill2019

andextrapolatefor2021and2022.

14doc20221116125801.pdf(.in)

15

/pulse/explore/user/2022/3/

5

Table1:DataSourcesotherthanPhonePePulse

Indicator

statelevel

Districtlevel

population

AnnualprojectionsbyMOHFW(2019)basedon

20llcensus

Annualuscensusprojectionsbasedon2011

censusExtrapolatedbyauthorsofthispaper

for2021and2022

Income

NetstateDomesticproduct(NSDP)(2018,2022)

(at2011-12constantprices)(RBI)

GDpcomposition

sectoralsharesofgrovalueadded(2018,2022)

(RBIHandbookofstatistics)

Internetpenetration

IndividualInternetpenetration(2020)(IMRB

kantar)

Householdinternetpenetration(2015-16)

(2019-21)(NFHS)

Educationand

Literacy

LiteracyRate(Age15-49)(2015-16)(2019-21)

(NFHS)16

LiteracyRate(Age15-49)(2015-16)(NFHS)

LiteracyRateandsecondaryEducationRate

(2020-21)(NSSMIS)

Digitalskills

percentofpopulationablebrowsetheinternet,to

sendemaiswithattachments(2020)(IMRB

kantar)

percentofpopulationabletosendemailswith

attachents(2020-21)(NSSMIS)

consumption

Meanhouseholdconsumptionexpenditureper

capita(2019)(AIDIS)

Meanhouseholdconsumptionexpenditureper

capita(2019AIDIS)(2014,NSSHCS)

wealth

wealthIndex(2015-16)(2019-21)(NFHS)

poverty

MultidimensionalpovertyHeadcountRatio

(NITIAayogbasedon201516NFHS)

MultidimensionalpovertyHeadcountRatio

(NITIAayogbasedon2015-16NFHS)

FinancialInclusion

percentofhouseholdswithbankaccount(2015-

16)(2019-21)(NFHS)

percentofhouseholdswithbankaccount

(2015-16)(2019-21)(NFHS)

Financial

Infrastructure

Numberofbankbranches(Garg&Gupta,2020)

(SHRUGdatabase)

Numberofbankbranches(GargGupta

2020)(SHRUGdatabase)

Note:NSSMIS:NationalSampleSurvey–MultipleIndicatorSurvey;NSSHCES:HouseholdConsumerExpenditure;NFHS:NationalFamilyHealthSurvey;AIDIS:AllIndiaDebt&InvestmentSurvey;MoHFW:MinistryofHealth&Family.

3.StylisedFactsonDiffusionofDigitalPayments

a.WhileUPIhasbeengainingtractionsincelate2018,theaccelerationfollowingthefirstCOVID-19lockdowninearly2020

isnoticeable.Bothtransactionvaluesand

transactionvolumeshaveincreasedsteadily

sinceApril2020(Figure3).Structuralbreak

testsidentifysignificantshiftsafterthefirst

andsecondlockdown(Appendix3).

16Overallliteracyratesforstatesarecalculatedastheweightedaverageofmaleandfemaleliteracyrates,usingmaleandfemalepopulationsharesasweightsrespectively.Maleandfemalepopulationaretakenfrom2019MoHFWCensuspopulationprojections.Forthedistrictlevel,overallliteracyratesarecalculatedasweightedaverageusingthesexratiooftheentirepopulationasprovidedbytheNHFS,downloadedfromHindustanTimes’Githubextract(

/

HindustanTimesLabs/nfhs-data).Boththeseweightedaveragesincuramarginoferrorduetoweightingbasedonmale-femaleratiosoftheentirepopulation,whiletheliteracyratesarebasedonpopulationaged15-49.

6

Figure3:GrowthinUPITransactions

8

6

4

2

0

zeroMDR1stlockdown2ndlockdown

NO.of

10,000

9,000

8,000

7,000

6,000

5,000

4,000

3,000

2,000

1,000

0

Source:NPCI

b.ThegrowthforPhonePemirrorsthatofsetofusers(Figure4).Whilethenumber

UPI.Growthinusersisslowerthangrowthofuserstripledbetween2018and2022,the

invalueandvolumeoftransactions,implyingnumberandvalueoftransactionsincreased

anincreaseinintensityofusebytheexistingbymorethan8times.

Figure4:TransactionVolumeandValueforPhonePehavebeengrowingatasteeperratethanregisteredusers

Figure4a:valueofphonepeTransactionsFigure4b:NumberofphonepeTransactions

Figure4CNumberofRegisteredphonepeusers

Note:PhonePereportsthenumberof‘RegisteredUsers’,whichisthenumberofuniqueusers(identifiedbyuniquemobilephonenumber)whohavedownloadedthePhonePeappandacceptedtheTermsandConditionsdisplayedduringtheonboardingprocess.Onlyasubsetofthesewouldbeactiveusers.

7

c.Leadershippositionsacquiredbystatesfromthetimeoflaunch,haveremainedunchangedintheadoptionanduseofUPI.Amongthestates,DelhiandTelanganahavemaintainedtheirtoppositionsinuserpenetration,transactionspercapita,transactionsvalueperperson,fromthebeginningoftheassessmentperiod(Figure5b,5dand5f).Appendix4providesacomparisonofdiffusionatthestate-levelbetween2018and2022usingchoroplethmaps.Currentusageisalsoseentobeconcentratedinthetopfewstates.Thetoptenstatesaccountedfor80%oftotalnumberoftransactions,andthetopfivestatesaccountedfor62%,whileconstitutingonly64%and29%

ofthepopulationrespectively.Thedistribution

forvalueoftransactionsandnumberofusers

isslightlylessconcentrated–inQ42022,the

toptenstatesaccountedfor78%oftransaction

valueandthetopfivestatesaccountedfor

60%,whileconstitutingonly67%and40%

ofthetotalpopulationrespectively.For

registeredusers,thetoptenstatesaccounted

for72%andthetopfivestatesaccountedfor

44%,whileconstituting68%and41%ofthe

totalpopulationrespectively.TheNortheast

regionasawholehasthepoorestoutcomes

fordiffusion,withArunachalPradeshshowing

somesignsofcatchup.

Figure5:Stateswithhighinitialvaluetendtoremainontop

Figure5a:NumberofRegisteredusersFigure5b:Registereduserpenetration

Figure5c:NumberofTransactionsFigure5dTransactionspercapita

Figure5e:TransactionAmountFigure5f:TransactionAmountperperson

Source:PhonePePulseandpopulationprojectionsfromMinistryofFamilyHealthandWelfare.

8

d.Whileeconomicprosperitymatters,itdoesnotfullyexplaindiffusion.Notallstateswithhighaverageincomepercapita,andnotalldistrictswithhighaveragehouseholdwealthindex,havehighPhonePeuserpenetration(Figure6).Whilethereisageneraltendencyforstateswithlowerincomepercapitaanddistrictsonthelowerendofthewealthindex

tohaveloweruserpenetration,beyonda

threshold-levelofincome,penetrationrates

differdespitesimilarlevelsofaverageincome/

wealth.InFigure6b,thelowest10districts

withrespecttowealthindexhaveamore

uniformdistributionofuserpenetrationas

comparedtothetopdistricts.

Figure6:Userpenetrationandeconomicprosperity

Figure6a:userpenetrationandincomepercapitabystate

Note:orderedfromlefttorightindecreasingorderofaverageincomepercapita

Figure6b:userpenetationoftopandbottomdistrictsbywealthindex

Note:orderedfromlefttorightindecreasingorderofwealthindex

Source:PhonePePulse(2022),NFHS(2019-2021)andNSSAIDIS(2019)

e.Aspirationaldistricts,asidentifiedbythegovernment’sprogramof2018,lagbehindotherdistrictsindiffusion17.Aspirationaldistrictsstartedoffslowandcontinuetolagbehindnon-aspirationaldistrictsbothinpercentageofregisteredusersaswellasaveragenumberoftransactionspercapita.Non-aspirationaldistrictshadrecordedover

1.6timesthenumberofusersandoverdouble