UPI’s Dominance in India’s Digital Payment Landscape

The United Payments Interface (UPI) has revolutionised India’s digital payment system. By the end of 2024, UPI accounted for 83% of the total payment volume in India. This is increase from 34% in 2019. The Reserve Bank of India (RBI) reported that UPI transactions reached 17,221 crore, contributing to a total payment volume of 20,787 crore. This growth reflects a compounded annual growth rate (CAGR) of 74% over five years.

Growth of UPI Transactions

Since its inception, UPI has seen remarkable growth. In 2018, UPI facilitated 375 crore transactions. By 2024, this number surged to 17,221 crore. The value of transactions also skyrocketed from Rs 5.86 lakh crore in 2018 to Rs 246.83 lakh crore in 2024. This indicates a CAGR of 89.3% in volume and 86.5% in value.

Shift in Payment Preferences

The rise of UPI has led to a decline in the usage of other payment systems. The share of systems such as RTGS, NEFT, and credit cards dropped from 66% to 17% between 2019 and 2024. This shift marks the growing preference for UPI among Indian consumers.

Comprehensive Growth in Digital Payments

India’s overall digital payment landscape has expanded . The total value of payments increased from Rs 1,775 lakh crore in 2019 to Rs 2,830 lakh crore by 2024. Retail digital payments witnessed a dramatic rise, climbing from 162 crore transactions in 2013 to over 16,416 crore transactions in 2025. This growth represents a nearly 100-fold increase over 12 years.

Digital Payment Index Performance

The RBI’s Digital Payment Index reflects this growth, increasing more than four-fold since its inception. It reached 445.50 in March 2024, up from a base of 100 in March 2018. This index indicates the robustness of India’s payment infrastructure and its performance in the digital landscape.

Regulatory Support and Innovation

The RBI has played important role in encouraging this growth. By encouraging innovation in the payment sector, the RBI has created a supportive environment for payment system operators. T Rabi Sankar, Deputy Governor of RBI, emphasised the Bank’s commitment to staying ahead in payment systems. This proactive approach has made India’s payment systems among the most advanced globally.

Recent Trends in Digital Transactions

Since 2023, digital transactions have escalated 94 times in volume and more than 3.5 times in value. Over five years, digital payments have increased 6.7 times in volume and 1.6 times in value. This results in a five-year CAGR of 45.9% in volume and 10.2% in value for digital payments.

Questions for UPSC:

1. Critically analyse the impact of UPI on India’s economy and society.
2. What are the implications of UPI’s growth on traditional banking systems? Discuss.
3. Explain the role of the Reserve Bank of India in promoting digital payments in India.
4. What are the challenges faced by digital payment systems in India? How can they be addressed?

Answer Hints:

1. Critically analyse the impact of UPI on India’s economy and society.

1. UPI has increased digital payment adoption, contributing to a rise in overall economic transactions.
2. It has enhanced financial inclusion by providing access to banking services for unbanked populations.
3. UPI’s convenience has transformed consumer behavior, leading to a shift towards cashless transactions.
4. The rapid growth of UPI has stimulated economic activities across sectors, especially e-commerce and retail.
5. However, there are concerns regarding cybersecurity and digital literacy among users, which need addressing.

2. What are the implications of UPI’s growth on traditional banking systems? Discuss.

1. UPI’s rise has led to a decline in the use of traditional payment methods like NEFT and RTGS.
2. It has pressured banks to innovate and improve their digital services to retain customers.
3. Traditional banks may face reduced transaction fees as UPI transactions are often free or low-cost.
4. Collaboration with fintech firms has become essential for banks to stay competitive in the digital space.
5. There is a need for banks to enhance their cybersecurity measures to protect against UPI-related frauds.

3. Explain the role of the Reserve Bank of India in promoting digital payments in India.

1. The RBI has implemented policies that encourage innovation and competition in the payment sector.
2. It has established regulatory frameworks that ensure the security and efficiency of digital payments.
3. The RBI’s Digital Payment Index reflects the growth and robustness of the payment ecosystem.
4. By engaging with payment operators, the RBI encourages a collaborative environment for technological advancements.
5. RBI’s initiatives aim to enhance consumer confidence and promote financial literacy regarding digital payments.

4. What are the challenges faced by digital payment systems in India? How can they be addressed?

1. Cybersecurity threats pose risks to user data and financial transactions.
2. Lack of digital literacy among certain demographics hampers widespread adoption of digital payments.
3. Infrastructure issues, especially in rural areas, limit access to reliable internet and payment services.
4. Regulatory compliance and interoperability between different payment platforms can be complex.
5. Addressing these challenges requires enhanced cybersecurity measures, educational initiatives, and investment in infrastructure development.