UPI crosses ₹314 lakh crore as India’s digital payments race enters new phase

India’s digital payments ecosystem continued its rapid expansion in the first half of 2026, with the Unified Payments Interface (UPI) strengthening its position as the country’s dominant payment rail, even as artificial intelligence (AI), fraud prevention and regulatory changes emerged as key areas shaping the next phase of growth, according to Grant Thornton Bharat’s India Payments Trends Report 2026 (H1).

UPI transaction volume rose to 24,162 crore in FY2025-26 from 2,233 crore in FY2020-21, registering a compound annual growth rate (CAGR) of 60.9%. The value of transactions increased to ₹314.23 lakh crore from ₹41.03 lakh crore over the same period, translating into a CAGR of 50.2%. 

Grant Thornton said the moderation in growth during FY26 reflects the scale already achieved by the platform, while merchant acceptance, new use cases and deeper consumer penetration continued to support expansion.

The broader digital payments ecosystem has also expanded sharply. Digital payment transaction volumes increased from 4,572 crore in FY2019-20 to 22,831 crore in FY2024-25, a CAGR of 37.9%. However, transaction value grew at a much slower CAGR of 3.5% during the period, rising from ₹2,953 lakh crore to ₹3,509 lakh crore. The report attributed the divergence to the growing prevalence of low-value, high-frequency UPI transactions.

The growth in acceptance infrastructure has been a major driver. The number of PoS terminals increased from 45.2 lakh in May 2021 to 115.3 lakh in May 2026, while Bharat QR and UPI QR deployments together reached 7,854 lakh in May 2026. The report noted that merchants, particularly smaller businesses, are increasingly favouring QR-based acceptance as UPI becomes the preferred consumer payment method.

The UPI market, however, remains concentrated. PhonePe and Google Pay together accounted for 79.5% of transaction volume and 82.7% of transaction value in May 2026. The report said strong merchant acceptance, user familiarity and ecosystem integration have created significant network effects and barriers to scale for newer players.

Alongside growth, fraud and cybersecurity have become increasingly important. Grant Thornton said fraud incidence deteriorated as digital payment volumes rose through September 2025, but stabilised from November onwards, potentially helped by wider deployment of AI-based mule-account detection and integration of the Financial Fraud Risk Indicator framework. Despite the increase in fraud activity, losses remained a negligible proportion of the overall payments ecosystem.

The regulatory focus is also shifting towards stronger consumer protection. The Reserve Bank of India is exploring a system-wide ‘Kill Switch’ that could allow customers to instantly block outgoing digital payments in cases involving fraud, cyberattacks, device theft or unauthorised account access. 

The RBI has also proposed a Payments Switching Service that would allow customers to retain their bank account numbers while switching banks, potentially reducing customer switching barriers and increasing competition among banks.