Estimate the number of UPI transactions in India per day — PM Interview Guesstimate Exercises

Hi folks!

We’re back with another guesstimate exercise :)

Just like any guesstimate exercise, we’ll start with -

Clarifying questions and assumptions:

• Are we focusing on specific transaction types: P2P, P2M, Autopay, etc.? Assume -> No, consider everything.
• Assuming this is across the board, and includes all the banks, and UPI apps available in India today? Assume -> Correct!
• Should we also consider non-smartphone, non-internet-based transactions? Assume-> Up to you! (As this number is not significant compared to other transactions, we’ll neglect this)

Our Base Equation =

#UPI transactions = Qualified users * Avg #transaction per user

Thought process:

• Any UPI transaction needs -> Smartphone + Internet connection + Bank Account.
• The number will depend on earning capacity, which can further depend on geography. Therefore, a split of <urban/rural + Earning member/ dependent> will help!
• Target Age group — 18–60 (based on access to tools mentioned above).

Segment — Urban

India’s total population = 1.4bn,

Urban Population: 30% *1.4bn — 400M

Age groups

• Qualified Age Group (A1): 18–60 → 60% → ~250M users.
• Users with smartphones and bank accounts → 80%*A1 → ~200M users.

Bucket-wise UPI transactions —

1. Earning member, regular account transactions:

• Merchant transactions channel → Credit Card, Debit Card, UPI, Netbanking, etc.
• Maximum usage around weekends, 10–15 weekly transactions. On average, P2M (person to merchant) UPI transaction frequency - 1/day. (assuming almost half of the total transactions are through UPI).
• In addition, P2P (peer-to-peer) transaction channels→ UPI, Netbanking, etc.
• Frequency: 3–5 times a week (of which assuming 60–80 % are through UPI) ~0.5/day.

Total UPI transactions → 1.5/day.

2. Dependents, low transaction rates:

• Merchant Transactions channel → Credit Card, Debit Card, UPI, Cash, etc.
• Distributed usage around the week, 5–10 weekly transactions. On average, P2M (person to merchant) UPI transactions → 0.5/day (assuming 60–80% of total transactions through UPI).
• In addition, P2P transactions→ 3–5 times a week (80% UPI) ~0.5/day.

Total UPI transactions→ 1/day.

• Let’s consider for urban users, the ratio of earning members to dependents is 70:30.

Total UPI transactions :

• 200M*0.7 = 140M * 1.5/day = Daily 210M transactions
• 200M0.3 = 60M * 1/day = Daily 60M transactions.

Total → 270M transactions (Urban)

Segment — Rural

India’s total population = 1.4bn,

Rural Population: 70% *1.4bn — 1bn

Age groups

• Qualified Age Group (A2): 18–55 → 60% → ~600M users.
• Smartphones and bank accounts → 30%*A2 → ~200M users.

Bucket-wise UPI transactions —

1. Earning member, regular account transactions:

• Merchant transactions channel → Credit Card, Debit Card, UPI, Netbanking, etc.
• Maximum usage around weekends, 5–10 weekly transactions. On average, P2M (person to merchant) UPI transaction frequency — 0.5/day. (assuming more than half of the total transactions are through UPI).
• In addition, P2P (peer-to-peer) transaction channels→ UPI, Netbanking, etc.
• Frequency: 3–5 times a week (of which assuming 50–60% are through UPI) ~0.3/day.

Total UPI transactions → 0.8/day.

2. Dependent, low transaction rates:

• Merchant Transactions channel → UPI, Cash, etc.
• Distributed usage around the week, 0–5 weekly transactions. On average, P2M (person to merchant) UPI transactions → 0.2/day (assuming 50–60% of total transactions through UPI).
• In addition, P2P transactions→ once a week ~0.1/day.

Total UPI transactions→ 0.3/day.

• Let’s consider for urban users, the ratio of earning members to dependents is 30:70.

Total UPI transactions :

• 200M*0.3 = 60M * 0.8/day = Daily 50M transactions
• 200M*0.7 = 140M * 0.3/day = Daily 40M transactions.

Total → 90M transactions (Rural)

Therefore, Total UPI Transactions: 360M

And, that’s a wrap! Hope you found this exercise helpful. Do consider following me for more such exercises!! Thank you :)