UPI overtakes cash as preferred payment mode; digital transactions jump 11-fold since 2021: Report

Unified Payments Interface (UPI) has emerged as the most preferred mode of transactions in India, accounting for nearly 80% of total digital payments by 2025, according to a Finance Ministry report released on Monday.

The report, titled “Socio-Economic Impact Analysis of the Incentive Scheme for Promotion of RuPay Debit Card and low-value BHIM-UPI (Person-to-Merchant) transactions”, was released by the Department of Financial Services during a Chintan Shivir held on February 13–14.

The independent study, conducted in consultation with the National Payments Corporation of India, said digital transactions increased nearly 11 times between 2021 and 2025.

Based on a primary survey of 10,378 respondents across 15 states, the report found that UPI is now the most preferred mode of transaction among users at 57%, overtaking cash at 38%, driven largely by ease of use and instant fund transfers.

About 65% of UPI users reported making multiple digital transactions daily, while adoption was highest among the 18–25 age group at 66%.

The study also noted that 90% of users reported increased confidence in digital payments after using UPI and RuPay cards, alongside a decline in cash usage and ATM withdrawals.

Cashback incentives motivated 52% of users to adopt digital payments, while 74% cited speed as the key advantage.

Among merchants, 94% of small businesses surveyed said they now accept UPI, with 72% expressing satisfaction due to faster transactions and improved record-keeping.

Nearly 57% reported higher sales after adopting digital payments.

During the scheme period, UPI QR deployments expanded sharply from 9.3 crore to around 65.8 crore, enabling wider merchant acceptance.

The number of banks live on the UPI platform rose from 216 in March 2021 to 661 by March 2025, while third-party app providers increased from 16 to 38.

The government provided budgetary support of ₹8,276 crore under the incentive scheme, with disbursements of ₹1,389 crore in FY22, ₹2,210 crore in FY23, ₹3,631 crore in FY24 and ₹1,046 crore in FY25 to help banks and payment ecosystem players scale low-value digital transactions nationwide.

While highlighting strong gains in UPI adoption and digital infrastructure, the report said focused efforts are now required to strengthen RuPay debit card usage, especially in rural and semi-urban areas.

The report suggested targeted merchant enablement programmes, promotion of low-value payments through solutions such as UPI Lite, and continued investments in connectivity, digital literacy and fraud risk mitigation.

The study also recommended introducing tiered cashback programs for RuPay transactions in Tier 2–6 cities, bundling RuPay with PM Jan Dhan Yojana benefits, and gamifying onboarding for AutoPay, Credit Line, and UPI Lite via in-app tutorials and rewards.