India’s digital payments ecosystem is witnessing unprecedented growth, with Unified Payments Interface (UPI) leading the charge. A recent SBI Research report (Issue #20, FY26) highlights how UPI has become the primary mode of money exchange for individuals and businesses across all segments. From groceries to loan repayments, UPI is reshaping financial habits and strengthening India’s fintech landscape.
📈 UPI Growth in 2025: Record Highs in Value & Volume
The numbers speak for themselves:
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Average daily UPI transaction value rose from ₹75,743 crore in Jan 2025 to ₹90,446 crore in Aug 2025.
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Daily transaction volumes crossed 675 million in August, reflecting widespread adoption.
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SBI emerged as the top UPI remitter (5.2 billion transactions), while Yes Bank led as the top beneficiary (8 billion transactions).
This rapid expansion shows how UPI is steadily replacing cash and debit cards as India’s preferred payment option.
📱 Dominance of UPI Apps: PhonePe, Google Pay & Paytm
The report notes that PhonePe, Google Pay, and Paytm dominate both in transaction value and volume. However, SBI Research warns that this heavy concentration could stifle India-centric fintech innovation.
👉 The study emphasizes the need for a homegrown “Desi UPI app” that can compete with global players while ensuring data sovereignty and innovation in digital finance.
🌍 State-Wise UPI Adoption: Maharashtra Leads the Way
For the first time, NPCI has released state-wise UPI transaction data. Top contributors (July 2025):
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Maharashtra – 9.8% share (₹2.3 lakh crore in value)
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Karnataka – 5.5% share (₹1.44 lakh crore)
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Uttar Pradesh – 5.3% share (₹1.31 lakh crore)
Interestingly, Uttar Pradesh is the only north Indian state in the top five, showing rapid digital adoption beyond metros.
🛒 P2M Transactions Drive Financial Inclusion
UPI started with peer-to-peer (P2P) transfers, but now peer-to-merchant (P2M) payments are driving growth:
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P2M share in transaction value grew from 13% (2020) to 29% (July 2025).
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P2M volume share rose from 39% to 64% in the same period.
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Top categories: groceries, restaurants, telecom, utilities, and digital goods.
Government-backed zero MDR policies and incentives for small-value transactions have encouraged merchant onboarding, strengthening India’s digital payment infrastructure.
💸 UPI Replacing Cash & Debit Cards
The SBI Research findings clearly show how UPI is replacing cash:
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UPI’s share in retail money demand (UPI + ATM withdrawals) surged from 40% in Nov 2019 to 91% in May 2025.
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Each ₹1 increase in UPI usage reduces debit card transactions by 14 paise.
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Growth in Cash in Circulation (CIC) is now much slower compared to UPI transactions.
This highlights India’s accelerated journey toward a cashless economy.
🏪 Merchant Category Classification: Debt Collections & Groceries Lead
NPCI introduced Merchant Category Codes (MCCs) for UPI transactions, covering 29 categories so far. Key insights (July 2025):
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Groceries & supermarkets: 24.3% of volume, 8.8% of value.
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Debt collection agencies: ₹93,857 crore in value (12.8% share), reflecting repayments of small-ticket digital loans.
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Restaurants & fast food: nearly 20% of volumes combined.
SBI Research recommends expanding to at least 100 MCCs for deeper transparency and better fintech product development.
🔮 The Future of UPI & India’s Fintech Growth
The report underscores three key priorities for the future of India’s digital payments ecosystem:
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Reduce dependence on few apps – foster a competitive fintech landscape with a Made-in-India UPI app.
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Expand merchant categories (MCCs) – enable data-driven insights and innovation for businesses.
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Leverage AI in UPI infrastructure – for fraud prevention, analytics, and customer personalization.
With its exponential growth, UPI is more than a payment system—it is a financial lifeline, advancing digital inclusion, boosting fintech innovation, and redefining money exchange in India.
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