Greater Gen Z adoption, near-universal merchant acceptance, govt push: How UPI overtook cash as India’s top payment mode

Unified Payments Interface (UPI) has emerged as the most preferred mode of payment among Indians, overtaking cash, reshaping transaction behaviour across age groups.

According to an independent study commissioned by the Finance Ministry, UPI accounted for 57 per cent of total transactions, while the cash stood at 38 per cent. Digital payments have surged over 11 times in the last four years with UPI accounting for 80 per cent of them.

The finding are based on a survey of 10,378 respondents across 15 states, including users, merchants, and service providers. The survey was carried out by an independent third-party research agency in consultation with the NPCI.

As per the study, the use of UPI payments is particularly high among the Gen Z generation, with 66 per cent adoption in the 18-25 years age group. Some 52 per cent of respondents said that cashback incentives motivated them to adopt the UPI.

Sixty-five per cent UPI users reported multiple daily transactions and 90 per cent admitted that their confidence in the digital payments increased after using UPI.

One of the key factors behind the UPI’s success in India has been its near universal acceptance among merchants. From major hotels to the smallest neighbourhood tea vendors, ubiquitous UPI acceptance has embedded digital payments into everybody commerce. According to the study, 94 per cent of small merchants have adopted the UPI.

Seventy-two per cent reported satisfaction due to faster transaction speed, improved record-keeping and operational convenience.

The study highlighted 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.

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 NPCI has rolled out its “UPI One World” wallet for visitors from over 40 countries attending the India AI Summit inaugurated by Prime Minister Narendra Modi on Monday.

During the five-day global summit, international delegates will be able to use the UPI One World wallet to make seamless, real‑time person‑to‑merchant (P2M) payments during their stay.

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