UPI transactions soar in FY25 but fall short of govt aim

Monthly transactions touched a high of 18 billion in March 2025 amounting to transactions worth ₹25 trillion—up 36% on-year in terms of volume and 25% in value.

A back-of-the-envelope calculation shows this volume of transactions means that around 350,000 UPI transactions were processed every minute in FY25.

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To put things in context of other popular payment platforms operating in the country, the Real-Time Gross Settlement (RTGS) platform processed 0.3 billion transactions worth ₹2,014 trillion in FY25; the National Electronic Funds Transfer (NEFT) platform processed 9.6 billion transactions worth ₹443.6 trillion; and the Immediate Payment Service (IMPS) platform processed 5.6 billion transactions amounting to ₹71.4 trillion, as per RBI data compiled by Mint.

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As of February 2025, there were at least 68 live UPI applications operating in the country, as per data by the National Payments Corporation of India (NPCI), which runs UPI. PhonePe continued to lead both in terms of the value and volume of transactions, followed by Google Pay and Paytm. Cred and Amazon Pay were the two others in the top five.

The numbers have been steadily increasing for UPI.

In the previous financial year, the UPI platform had processed a total of 131 billion transactions worth ₹200 trillion. In calendar year 2024, too, UPI had processed 172 billion transactions worth ₹247 trillion, up from 118 billion transactions worth ₹183 trillion in 2023.

“With daily transactions averaging ₹79,903 crore in March 2025, up 1.9% from February, and volumes rising 2.6%, these numbers underscore the rapid adoption and trust in digital financial solutions. This sustained growth signals deeper financial inclusion, enhanced consumer confidence, and a thriving digital economy,” said Dilip Modi, founder and chief executive officer of rural payments focussed fintech platform Spice Money.

However, the volume and value of transactions for FY25 fell short of the government’s target. While announcing the UPI subsidy of ₹1,500 for FY25, the government had said it aimed to push financial inclusion through a target of 200 billion transactions by the end of the financial year.

UPI payments are currently free of cost for users, with the government terming the platform a public good. The government and NPCI compensate payment ecosystem players for the cost incurred by them to process UPI transactions.

Last month, the Union Cabinet approved an incentive scheme for UPI transactions for FY25, where it estimated an outlay of ₹1,500 crore for incentivizing low-value peer-to-merchant (P2M) UPI transactions of upto ₹2,000 for small merchants. However, this outlay was lower than ₹3,631 crore in FY24 and ₹2,210 crore in FY23.

As per the scheme for FY25, small merchants accepting UPI payments will receive an incentive of 0.15% per transaction made between April 2024 and March 2025. Zero Merchant Discount Rate (MDR) for transactions across all categories will continue, ensuring free digital transactions.

Read more: UPI ends 2024 on a high; industry bats for more incentives, monetisation to support growth

Further, 80% of the amount claimed by acquiring banks will be disbursed without conditions each quarter. Another 10% will be released if banks maintain ‘technical decline’—the number of failed transactions due to technical issues on the platform—at below 0.75%. The remaining 10% will be released if the ‘system uptime’—the availability of the system processing the transactions—is above 99.5%. The government also guided that the scheme would continue into FY26.

The reduced outlay for FY25 has brought to the forefront conversations about the rising burden of bearing the cost of free UPI transactions and the need to introduce a tiered fee structure for at least higher value transactions.

Some believe that increasing reliance on UPI transactions is fostering comfort with digital financial transactions and government support is needed to continue to support financial inclusion.

“As millions of Indians increasingly rely on UPI for transactions ranging from daily essentials to significant purchases, this trust is fostering comfort with digital financial services more broadly. This growing confidence is critical as it creates pathways for previously excluded populations to access formal financial systems,” said Deepak Verma, managing director and chief executive of consumer-facing payments platform Findi, adding that India must continue building a comprehensive ecosystem that addresses diverse needs.

However, other industry experts said that the government’s move indicates it is no longer a question of whether UPI transactions should be chargeable but about how and when to introduce these charges.

Industry body Payments Council of India (PCI) recently wrote to the Prime Minister’s Office, urging the government to reconsider MDR on UPI and RuPay debit card transactions—both of which have been exempt since 2020. MDR is the fees charged to merchants by banks or payment service providers for processing digital transactions, typically calculated as a percentage of the transaction value.

The industry body submitted that the ₹1,500 crore allocated for UPI incentives accounts for only 0.02% of the total UPI transaction value of ₹245 trillion in 2024, whereas the annual cost of maintaining, strengthening and expanding the UPI ecosystem is estimated to be around ₹10,000 crore.

“PCI is only suggesting an MDR on UPI for large merchants, specifically those with a turnover of over ₹50 lakh. They are not proposing any MDR for smaller merchants, which account for the majority of UPI QRs. It is unlikely to have a significant impact because, for large merchants, when they accept digital transactions via cards, they are already paying an MDR and therefore, they will simply pay an MDR on UPI as well,” Sunil Rongala, Senior VP – Strategy, Innovation & Analytics – India, Worldline told Mint.

The MDR on UPI will still be lower than the MDR on cards, and thus it will remain economical for large stores or companies to continue to accept UPI, he said, adding that he does not “foresee any meaningful reduction in UPI usage in terms of both volumes and value” due to the introduction of any minimal charges.

Market dominance

UPI continues to be the most popular real-time payments platform in India, estimated to account for nearly 80% of all digital payments in the country. A 2 April ‘Digital Payments Report’ by Worldline India showed that peer-to-peer (P2P) UPI transactions grew 30% to 35 billion in the second half of calendar year 2024, with their value rising 26% to ₹94 trillion. During the same period, the volume of P2M transactions grew 50% to 39 billion and the value grew 43% to ₹36 trillion. The number of UPI QR codes jumped 126% to 633.44 million, also reflecting growth in the UPI acceptance infrastructure.

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The focus on small value transactions–expected to account for almost 90% of all UPI transactions, comes amid a decline in the average ticket size of UPI transactions. The average ticket size of UPI transactions fell 8% on year to ₹1,396 in H2 2024 from ₹1,515 in the year ago period. For P2P transactions, the ticket size fell 3% to ₹2,666 whereas for P2M transactions by 4.7% to ₹626.

“This fall in P2M ATS is a trend that has been continuing for some time now indicating how UPI is the primary choice for micro transactions indicating its long-term sustainability,” the Worldline report said.