Digital Payments Landscape in India
The digital payments ecosystem in India has seen significant transformation, especially due to the Unified Payments Interface (UPI). This change was particularly accelerated during the Covid-19 induced lockdown starting in 2020.
Growth and Adoption of UPI
- UPI transactions grew from 2.23 billion in December 2020 to 16.73 billion in December 2024, marking a growth rate of over 651%.
- Despite the expectation of reduced cash usage, cash circulation has reached an all-time high.
- Digital payment options have expanded, introducing services like AePS, NETC, UPI123Pay, and UPI Lite.
Challenges and Innovations
- The Reserve Bank of India's New Umbrella Entity (NUE) scheme, intended to foster competition against NPCI, has not yet delivered significant innovations beyond UPI.
- While UPI helped India achieve 48.5% of global real-time payments by volume, cross-border payments remain a challenge.
Current Statistics and Issues
- In January 2025, over 20 billion digital payments worth nearly Rs 250 lakh crore were processed in India.
- A significant portion of India's adult population (40%) remains outside the digital payments ecosystem, largely due to lack of awareness.
- Currency in circulation has more than doubled from Rs 13.35 lakh crore in 2016-2017 to Rs 35.15 lakh crore by March 2024.
Concerns Over UPI Sustainability
- With no merchant discount rate (MDR), there is a struggle to monetize UPI transactions.
- Growth has slowed to 20-25%, with insufficient investments in smaller markets.
- The government extended a Rs 1,500 crore incentive for promoting small-value BHIM-UPI (P2M) transactions, but the sustainability of the UPI ecosystem remains a concern.
Conclusion: The digital payment landscape in India remains at a crossroads with significant achievements in UPI growth but facing challenges of cash reliance, sustainability, and cross-border payment expansion.