UPI is Now India's Favorite Payment System With 83% Share in Digital Payments: Report UPI's contribution to digital payment volumes skyrocketed from 34 per cent in 2019 to 83 per cent in 2024, reflecting a compound annual growth rate (CAGR) of 74 per cent over five years

The Unified Payments Interface (UPI) has revolutionized India's digital payment landscape, emerging as the primary driver of the country's shift towards a cashless economy. UPI's contribution to digital payment volumes skyrocketed from 34 per cent in 2019 to 83 per cent in 2024, reflecting a compound annual growth rate (CAGR) of 74 per cent over five years, as per the Reserve Bank of India's (RBI) Payment System Report.

In layman's terms, UPI transactions surged from 3.75 billion in 2018 to 172.21 billion in 2024. The total value of these transactions escalated from INR 5.86 lakh crore to INR 246.83 lakh crore during the same period, marking CAGRs of 89.3 per cent in volume and 86.5 per cent in value, respectively.

The report explains this growth through the technology acceptance model (TAM), which hypothesizes that 'perceived usefulness' and 'perceived ease of use' are fundamental determinants of user acceptance. UPI's features such as instant 24/7 fund transfers, along with two-factor authentication and the use of virtual payment addresses or QR codes, have made it both beneficial and user-friendly, leading to widespread adoption.

Apart from ease of access, initiatives like the 'UPI 2.0 program' in 2018 introduced features such as increased transaction limits, fund blocking mandates, and the inclusion of overdraft accounts as funding sources. Subsequent initiatives have only bolstered UPI's functionality and user convenience, like the one in August 2019.

A framework was established to enable e-mandates on cards and prepaid payment instruments (PPIs) for digitizing recurring payments. This framework, which includes safety measures like additional factor of authentication during e-mandate registration, modification, and revocation, as well as the first transaction and simple/automatic subsequent successive transactions, was later extended to cover UPI-based transactions in January 2020 (UPI Autopay). Similarly, the facility of cash withdrawal at merchant locations was also extended to UPI.

To bridge the digital divide, 'UPI123Pay' was introduced, enabling over 400 million feature phone users to access digital payments through options like IVR, missed calls, app-based functionality, and proximity sound-based payments. Additionally, the UPI transaction limit was also raised from INR 2 lakh to INR 5 lakh. This encouraged a hike in participation of retail customers in financial markets, including investments in government securities and payments for Initial Public Offerings (IPOs).

The per-transaction limit for subsequent transactions (without additional factor of authentication) under the e-mandate framework for processing recurring transactions done using cards, PPIs, and UPI was enhanced from INR 5,000 to INR 15,000. Furthermore, RuPay credit cards were allowed to be linked to UPI, expanding the range of financial products for payment processing and providing additional convenience for customers on the UPI platform.

The introduction of a single-block-and-multiple-debits feature allows customers to create payment mandates by blocking funds for specific purposes, building trust in transactions by ensuring timely payments for merchants while securing funds in the customer's account until the actual delivery of goods or services.

By continually enhancing UPI's features and expanding its accessibility has ensured that the benefits of advancements in the payments ecosystem reach a wider segment of the population, solidifying UPI's position in the country.