UPI dominates India's digital merchant payments market with 77.3% share
What's the story
India's digital merchant payments market is witnessing a major shift. According to a report by Equirus, the Unified Payments Interface (UPI) has captured a record 77.3% of person-to-merchant transactions in July. This is an increase from 74.9% in July last year and 77.1% in June this year. The trend indicates that UPI is becoming the preferred mode for retail purchases and merchant transactions due to its convenience and accessibility.
Market expansion
Credit cards lose ground to UPI
The growth of UPI comes as India's digital merchant payments market continues to expand.
The sector has grown 19.6% year-on-year (YoY), reaching ₹11.7 lakh crore in July. This growth is largely driven by the increasing adoption of UPI for merchant transactions.
Credit cards, on the other hand, have seen their share of merchant payments fall from 19.8% last year to just 17.7% in July this year.
Payment shift
Debit cards also see a decline
Debit cards have also witnessed a decline in their share of merchant payments.
The figure dropped from 3.9% last year to just 3.2% in July this year.
This decline is due to the continued shift from direct bank-account spending toward UPI, further strengthening the latter's dominance in India's digital merchant payments market.
Retail impact
UPI's dominance in retail payments
The trend of UPI's dominance isn't limited to the merchant payment segment.
In India's broader retail payments market, UPI's share of transaction volumes increased from 73.6% in FY23 to a whopping 86.8% in the June quarter of FY27, CareEdge Analytics & Advisory reported.
This further highlights how UPI is taking over other payment modes such as credit and debit cards across different sectors.
Sustainability concerns
Shift from adoption to sustainability
With UPI's dominance in the payment space, the focus is now shifting from adoption to sustainability.
Proposed changes to the Merchant Discount Rate (MDR) framework could allow targeted charges on select higher-value merchant transactions.
However, CareEdge estimates that an MDR of 0.25-0.50% could create a potential gross revenue opportunity of ₹15,000-30,000 crore while keeping most everyday and person-to-person UPI payments free.