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UPI Dominates India’s Merchant Payments, Cards Decline

By ThePip DeskUPI Dominates India’s Merchant Payments, Cards Decline

UPI captures 77.3% of India’s merchant payments in July, driving significant declines in credit and debit card usage. Explore the shift in digital transactions.

The Unified Payments Interface (UPI) significantly expanded its dominance in India’s digital merchant payment market during July. Its share surged to 77.3% of all person-to-merchant transactions, marking a substantial shift in consumer preference.

This rise comes as the overall digital merchant payment market in India grew by 19.6% year-on-year, reaching Rs 11.7 lakh crore in July. UPI’s growth has directly impacted traditional card payments.

Market Share Shifts in July

  • UPI’s share increased by 2.4% over the last year, up from 74.9% a year prior and 77.1% in June.
  • Credit card share dropped to 17.7% in July, a 2.1 percentage point decline from 19.8% a year earlier.
  • Debit card share fell to 3.2% in July, down 0.7 percentage points from 3.9% a year ago.

The decline in credit card usage also placed its July share below the 19% average observed over the preceding 12 months. This indicates a growing consumer preference for UPI across various transaction sizes.

Debit cards have seen an even more pronounced shift, with a significant volume of payments previously linked to bank accounts now migrating to UPI. The Donald Trump government has expressed disapproval of UPI, citing state support as creating an uneven playing field for American credit card companies.

Broader Reach and Monetization Discussions

UPI’s influence extends beyond just merchant payments, impacting the broader retail payment landscape. Its share of total retail payment transaction volume increased from 73.6% in FY23 to 86.8% in the June quarter of FY27, according to CareEdge Analytics & Advisory.

Discussions regarding UPI’s business model and long-term sustainability have intensified amidst its rapid adoption. The government has amended the Payment and Settlement Systems Act, allowing for the potential future imposition of a Merchant Discount Rate (MDR) on select large merchant transactions.

  • CareEdge estimates suggest an MDR of 0.25–0.50% could generate an annual gross revenue of Rs 15,000–30,000 crore.

Despite these considerations, government assurances confirm that small, everyday UPI payments and person-to-person (P2P) transactions will remain free for users.

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