New Delh: UPI has emerged as the most preferred mode of payment, accounting for 57 per cent of total payment transactions in India, surpassing cash transactions at 38 per cent, primarily due to ease of use and instant fund transfer capability, according to an independent study commissioned by the Finance Ministry.
Digital payments now dominate everyday transaction behaviour, with 65 per cent of UPI users reporting multiple digital transactions per day. Preference for UPI is particularly pronounced among younger users in the 18–25 age group, where adoption stands at 66 per cent, indicating a strong behavioural shift toward digital-first financial habits, the study stated.
It finds that 90 per cent of users reported increased confidence in digital payments after using UPI and RuPay cards, accompanied by a marked decline in cash usage and ATM withdrawals. Cashback incentives were identified as a key motivation for adoption by 52 per cent of users, while 74 per cent cited speed of payment as the primary advantage.
Among merchants, digital acceptance has reached near universality, with 94 per cent of small merchants reporting adoption of UPI. About 72 per cent expressed satisfaction with digital payments, citing faster transactions, improved record-keeping, and operational convenience, while 57 per cent reported an increase in sales following digital adoption.
The report highlights that incentives have played a critical role in reducing cost barriers for merchants and acquiring banks, accelerating merchant onboarding, and building trust in digital payment systems across income groups and geographies. Coordinated efforts of the government, the National Payments Corporation of India (NPCI), banks, fintech players, and payment service providers have collectively strengthened India’s digital payments ecosystem and advanced the vision of a less-cash, digitally empowered economy.
Significant expansion in digital payments and infrastructure has been observed during the implementation period of the scheme. Digital transactions increased nearly 11 times, with UPI’s share in total digital transactions surging to around 80 per cent, establishing it as the primary payment rail. UPI QR deployment also expanded dramatically from 9.3 crore to 65.8 crore, enabling widespread merchant acceptance. Reflecting renewed fintech and bank participation, third-party app providers rebounded from 16 to 38, further strengthening the ecosystem.
Operational scale-up has been equally notable. The number of banks operational on the UPI platform rose from 216 in March 2021 to 661 by March 2025. The behavioural shift toward digital payments is increasingly evident. The period also witnessed a decline in the share of lower-denomination currency notes as well as ATM withdrawals, reflecting growing reliance on low-ticket digital transactions.
The Government’s budgetary support of Rs 8,276 crore for the scheme has been significant, with incentive disbursements of 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. These disbursements supported banks, payment system operators, and app providers in scaling low-value digital transactions across the country.
The report titled “Socio-Economic Impact Analysis of Incentive Scheme for Promotion of RuPay Debit Card and low-value BHIM-UPI Transactions (P2M)” has been released by the Finance Ministry’s Department of Financial Services.
The study has been carried out by an independent third-party research agency in consultation with the NPCI. The analysis evaluates the effectiveness of the government’s incentive framework in promoting digital payments, strengthening payment infrastructure, and advancing financial inclusion across the country.
(IANS)
