Daijiworld Media Network - New Delhi
New Delhi, Feb 16: Unified Payments Interface (UPI) has solidified its position as India’s leading payment method, accounting for 57% of all transactions, overtaking cash, which now represents 38% of payments, according to an independent study commissioned by the Finance Ministry. The platform’s ease of use and instant fund transfer capabilities have been key drivers of its widespread adoption.
Digital payments have become a part of daily life, with 65% of UPI users making multiple transactions each day. Adoption is especially strong among the younger demographic, with 66% of individuals aged 18–25 preferring UPI, highlighting a shift toward digital-first financial habits.
The study also shows that 90% of users feel more confident conducting digital transactions after using UPI and RuPay cards. Cash usage and ATM withdrawals have declined significantly. Among users, 52% cited cashback incentives as a primary reason for using UPI, while 74% highlighted transaction speed as the main advantage.
Merchant adoption of digital payments has also surged. Nearly 94% of small businesses now accept UPI, with 72% reporting satisfaction due to faster payments, improved record-keeping, and operational convenience. Moreover, 57% of merchants have seen a boost in sales after embracing digital payments.
Incentive programs have played a pivotal role in accelerating adoption by lowering costs for merchants and banks, facilitating onboarding, and building trust across different income groups and regions. Collaboration among the government, the National Payments Corporation of India (NPCI), banks, fintech companies, and payment service providers has strengthened India’s digital payment ecosystem and supported the transition toward a less-cash economy.
The study noted remarkable growth in digital infrastructure during the program period. Total digital transactions grew nearly 11-fold, with UPI accounting for about 80% of these transactions. UPI QR code deployment expanded dramatically from 9.3 crore to 65.8 crore, enabling wider merchant acceptance. Third-party app providers also grew from 16 to 38, reflecting renewed participation from fintech players and banks.
Operational capacity has expanded as well. The number of banks on the UPI platform rose from 216 in March 2021 to 661 by March 2025. This period also saw a decline in low-denomination currency use and ATM withdrawals, indicating a growing reliance on digital transactions for everyday payments.
Government support has been substantial, with a budgetary allocation of Rs 8,276 crore for the incentive scheme. Disbursements to banks, payment operators, and app providers totaled Rs 1,389 crore in FY 2021–22, Rs 2,210 crore in FY 2022–23, Rs 3,631 crore in FY 2023–24, and Rs 1,046 crore in FY 2024–25, helping scale low-value digital transactions nationwide.
The findings come from the report titled “Socio-Economic Impact Analysis of Incentive Scheme for Promotion of RuPay Debit Card and low-value BHIM-UPI Transactions (P2M),” released by the Finance Ministry’s Department of Financial Services. Conducted by an independent research agency in consultation with the NPCI, the study evaluates the effectiveness of government incentives in promoting digital payments, enhancing infrastructure, and advancing financial inclusion across India.