10 years and beyond: Some success seen, but UPI still needs more adoption

When the Unified Payments Interface (UPI) was, in a pilot, launched on April 11, 2016, by the then Reserve Bank of India governor Raghuram Rajan and former Chairman of UIDAI and Advisor to the National Payments Corporation of India (NPCI) Nandan Nilekani, there was enough doubt in peoples’ minds of its success. 

This was a peer-to-peer instant transfer of funds taking place between bank accounts, using a smartphone.  After all, till then, India was—and in some pockets, still is—a cash-led ecosystem. Mass new-age, technology-led government programmes had rarely worked before. 

A few months later, in 2017, came the QR code, which was the game-changer. Scanning a QR code and making a payment with a click or a password was of great ease.  

“The push came on the back of the JAM trinity (Jan Dhan Yojana, Aadhaar, and Mobile) which was the fusion for the need for digital accounts. Banks came up with charges on withdrawal of cash from ATMs, which saw people shifting elsewhere. The penetration of smartphones combined with ease of using UPI saw people adopt this ecosystem,” says Bhavik Hathi, managing director with Alvarez & Marsal's Global Transaction Advisory Group in Mumbai.  

PwC India’s partner and leader (Payments Transformation and FinTech) Mihir Gandhi tells Fortune India: “The coming of the pandemic led to more cashless, contactless payments with touching a card or money. From a merchant perspective, going back to zero charges also assisted the acceptance. There are also P2P and P2M used cases.”  

UPI racing ahead, but cash still present 

UPI has now completed its 10th year of operations. After starting extremely slowly, with an annual transaction volume of 1.78 crore for FY17, in FY26 UPI clocked an annual transaction volume of 24,162 crore, as highlighted by the Ministry of Finance on August 24. In value terms, UPI transactions have soared at a 155% CAGR to ₹314 lakh crore in FY26 from ₹0.07 lakh crore in FY17 (see chart). 

The number of banks live on UPI have risen to 703 in FY26 from 44 in FY17. 

UPI now roughly accounts for between 81-85% share of retail digital transactions volume, up from 75.6% in FY23, which is proof of the sustained domination that it commands over the system. 

And even while UPI juggernaut continues to gather pace, India’s economy continues to go through what policy makers call a “cash paradox”. RBI deputy governor Shirish Chandra Murmu, in an August 13 address, said that currency in circulation continues to grow at double-digit rates even as cash's share of individual transactions declines, because of growing digital payment adoption.  

“In the previous decade, adoption of digital payments in India has been revolutionary to say the least, yet cash in circulation has not declined, especially in rural and semi-urban areas, among low-income groups, older populations, and small businesses,” he said, in a keynote address at the Global Cash Management, 2026 in Jakarta, Indonesia, on August 13, 2026. 

As a policymaker, Murmu’s concerns are real. Alvarez’s Hathi says: “India's economy will not go cashless over the next few years. Cash in circulation is only growing in the economy, but this is because the GDP has also doubled in the last decade. However, cash as a percentage of GDP is declining. We use electronic modes for smaller payments, cards for larger payments and cash for high value payments in real estate or gold in the parallel economy.” Cash as a percentage of GDP has fallen to around 11.2-11.7% in FY25 from its pandemic peak of 14.4% in FY2021. 

NPCI officials were not available to participate in the story. 

Next phase: MDR, to grow credit line 

After five years of a zero charge regime for merchants, the government is working towards introducing a merchant discount rate (MDR). India’s payments ecosystem has MDR on cards, which is already functioning well, but there is no official, detailed data to indicate the per-transaction cost of operating UPI. 

Market intermediaries, including some payment aggregators, third party application providers (TPAPs) and banks have been involved in talks with the government, RBI and the NPCI, relating to deciding the MDR. It is believed that the fee charged towards large merchants could be of 25 to 40 bps per transaction.  

Experts are welcoming the need for such a move at this stage. Alvarez’s Hathi says: “The ecosystem enabling payments has to make money so that they can grow, innovate, introduce features and invest in security. We cannot have a situation where they cannot invest and grow. Hence MDR is welcome. One may see a drop in volumes initially but that would be a knee-jerk reaction.”  

According to PwC India’s Gandhi, “Participants will get funds which they can plough back to improve profitability, carry out innovations, give incentives to customers, and create partnerships. MDRs on cards is still there and working well and is accepted by the merchants.” 

One of the most debated issues has been whether the credit line on UPI (CLOU) has been a success or not. Through this medium banks allot a line of credit to consumers for retail expenditure. Axis Bank, HDFC Bank, Bank of Baroda, Canara Bank and ICICI Bank, are some of the banks offering this facility. Gandhi in PwC’s “The Indian Payments Handbook 2025-2030”, authored by him, says: “While credit line on UPI and credit card on UPI have gained significant traction, there is a huge opportunity for ecosystem players to capitalise on UPI data to develop innovative products, such as embedded financing options integrated into the purchase journey.” 

Hathi of Alvarez says there is potential for CLOU to grow “but it will take time.” Deloitte India’s partner and banking & capital markets leader Vijay Mani however says there “is still stress around unsecured credit, which may raise fears of bad loans increasing, though it may not shake up the system due to the size of the loans. 

“The product has its merit, but banks are pulling back on SME, retail lending in unsecured. They are unlikely to push this product till the ecosystem improves,” he says.  

A small concern is that a product like this could cannibalise the credit card on UPI business (led by RuPay). But the bigger focus would now be how to get more banks involved into the product line and also how the book can be built safely so that it leads to financial inclusion, without creating systemic stress. 

International UPI: more work needed 

India has already signed formal agreements and MoUs with 23 countries for digital public infrastructure. UPI is officially live and operational in countries such as France, Singapore, the UAE, Bhutan, Nepal and Sri Lanka, amongst others. 

The data shows that cross-border UPI transactions were at around 14.86 lakh in FY26, double the level of 7.55 lakh recorded in FY25. But experts point that it is negligible as part of the total ecosystem.  

PwC India’s Gandhi says: “It is still taking time to pick up. Number of transactions are low, awareness is low, acceptance touch points are limited...a lot more needs to be done by both countries as its currently bilateral tie-ups. Acceptance of physical touch points in those countries to allow UPI to be used with the currency conversion needs to be enabled. Either one is dependent on a local partner or the government to provide the right impetus.” 

Hathi of Alvarez agrees, saying that the international UPI venture has yet to pick up. “Globally, for an Indian traveller it is not as seamless and intuitive to use UPI and also they need to use forex for most other uses which makes the usefulness of UPI less relevant.”  

The truth is that while Indians abroad may prefer to use UPI for low-ticket transactions like restaurant meals or tour tickets, high-value transactions may still happen through credit cards. 

The future: what India needs 

All experts agreed that the most important focus in terms of digital payments will be to get more Indians to adopt digital payments. According to NPCI data there were 55.49 crore users onboarded on UPI platform as in June 2026, the Ministry of Finance reported. 

Deloitte’s Vijay says that he would want to see UPI touch close to a billion (100 crore) users as a milestone. “It is difficult as this will also mean widespread economic growth to take place,” he said. He also wishes for a breakthrough in cross-border payments. Gandhi agreeswith Vijay, of getting more customers to adopt digital payments. “But we still have a long way to go,” he says.  

India is likely to pitch seamless cross-border digital payments and the adoption of central bank digital currencies (CBDC) to BRICS members when it meets in India next month, media reports have said. 

UPI’s success was seen because it was a user-friendly interface for newer and older generation. But some sections of the same older generation have got burnt with security issues. There is a lot more investment which needs to be made towards technology infrastructure, to make the system robust and secure.