Summary of this article
UPI crossed 24,000 crore annual transactions in FY2025-26.
Low-value merchant payments drive everyday digital participation.
UPI is expanding access beyond smartphones.
By Prakash Kumar, Former CEO GSTN and currently advising IRDAI and TCF on AI and Technology
The most revealing number in UPI’s first decade may not be its annual transaction volume. It may be Rs 500. By FY2026, 86 per cent of UPI merchant transactions were below that value, which places UPI inside the everyday economy of groceries, local transport, medicines and tea, purchases that until recently were settled almost entirely in cash.
This is where UPI’s contribution to financial inclusion becomes clearer. Access begins with a bank account, while participation begins when that account can be used easily to send, receive and spend money in daily life. Over the past decade, UPI has helped make that transition possible for a much wider section of society. UPI’s real achievement has been to make the bank account usable in everyday economic life.
The scale provides the backdrop. UPI grew from 2 crore transactions in FY2016-17 to 24,161.69 crore worth about Rs 314 lakh crore in FY2025-26, while participating banks rose from 44 to 703 and users crossed 55 crores. The more important shift lies in how those transactions are used and in who can take part.
Everyday payments went digital
For consumers, mobile phones turned the bank account into something that could travel with them. For merchants, QR codes lowered the threshold for accepting digital payments. A neighbourhood store or street-side seller no longer needed costly acceptance infrastructure, and the same interoperable QR code could serve a roadside vendor and a large retailer.
That acceptance had to be built beyond the cities, and it was. The Reserve Bank’s Payments Infrastructure Development Fund subsidises acceptance infrastructure in tier-3 to tier-6 centres, and about 4.77 crore digital touch points had been deployed under it by 31 May 2025.
Person-to-merchant payments now account for 63 per cent of UPI transaction volume, while person-to-person payments account for 71 per cent of value, which means UPI serves two needs at once: frequent everyday purchases and larger transfers between individuals.
The dominance of low-value merchant payments matters most of all. When a system works as readily for Rs 40 as for Rs 4,000, digital participation is no longer confined to higher-value purchases or formal retail, and merchants built around many small sales can take part without changing the economics of the sale.
UPI’s speed owed as much to design choices as to demand. Unlike many digital payment systems built by a single provider, UPI was architected as an open, interoperable protocol from the outset-any bank, any app could plug in, and a payment initiated on one could be received on another.
Access beyond smartphones
The next challenge was device and connectivity, since a smartphone-led system could still leave out people who use feature phones or live with patchy internet access. UPI 123PAY responded through interactive voice response and missed-call-based payments, letting feature-phone users transact with no internet connection at all, in a dozen languages.
This matters because exclusion is rarely caused by a single barrier. Device cost, connectivity, language and confidence can each decide whether access turns into use.
Participation through trust
UPI Circle introduces another idea, which is that not every user needs to begin with complete financial independence. It allows a primary user to delegate payments to a trusted secondary user within defined limits, so a parent can let a child make controlled payments on their own.
That turns delegation into a bridge. It recognises that households often share financial responsibilities, and that digital inclusion can expand through trusted relationships rather than only through individual account ownership.
A wider inclusion ecosystem
UPI has grown alongside a broader financial-inclusion architecture rather than in place of it. Jan Dhan accounts expanded sharply over the decade, while Aadhaar-based identity and mobile connectivity strengthened the infrastructure around them. India now has 58.63 crore Jan Dhan accounts, with nearly 78 per cent in rural and semi-urban areas.
The next decade presents an opportunity to build on UPI’s remarkable success. Its growing international presence across multiple countries reflects the strength and global relevance of India’s digital payments model. At the same time, there is significant potential to further deepen inclusion by accelerating adoption among women users and enabling small merchants to leverage their UPI transaction histories for greater access to formal credit. UPI’s second decade can be defined by expanding financial participation and ensuring that the benefits of digital payments reach every segment of society.
(Disclaimer: Views expressed are the author’s own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.)
