With a total value of ₹314 trillion, the unified payments interface (UPI) is now the world’s largest digital payments system. In roughly a decade since its launch, monthly UPI transaction value has reached nearly 70% of the cash in circulation in India. Its rapid success has prompted the National Payments Corporation of India (NPCI), which administers the system, to seek expansion into more countries beyond the 10 where it currently operates.
Detailed data released last month by PhonePe, which accounts for about half of UPI transactions, suggests that the payment technology is also gaining ground beyond India’s biggest cities. To be sure, the PhonePe data may not be nationally representative of the entire UPI market, as it focuses on certain markets and segments. It nevertheless throws up some interesting trends. Mint explores.
Cashing out
A 2025 study by the Reserve Bank of India (RBI), titled Impact of UPI on Cash Demand—Evidence from National and Subnational Levels, found that greater UPI adoption is associated with lower demand for cash, both nationally and at the sub-national level. “CIC (currency in circulation) growth slowed to 4-6% in recent years, driven by a structural shift towards digital payments,” the study said.
It also found that ATM cash withdrawals as a share of GDP have fallen steadily over the years.
Comparing physical cash with UPI transactions is not straightforward. Currency is measured at a point in time, while are measured over a period, such as a quarter or a year. With that caveat, the growth in monthly UPI transaction value relative to average currency outstanding that month is striking. RBI data shows that UPI transaction value was equivalent to 27% of currency outstanding in early 2022. By July 2026, that figure had risen to 70%.
The ratio, however, appears to be tapering off, having remained in a 60-70% range over the past two years.
Prosperity gains?
The PhonePe dashboard provides more granular data, giving details of the top 10 districts in India by transaction volume. For these districts, it also gives data by transaction value, number of registered merchants, and number of registered users. Bengaluru Urban was the top district in April-June 2026 by a wide margin, with UPI transaction value of around ₹2.23 trillion, more than twice the ₹1.04 trillion recorded by second-ranked Pune.
More broadly, the RBI study found that rising average incomes were a key driver of UPI adoption. As states moved from lower-income to more middle-income levels, UPI usage rose sharply. “Formalization of the workforce is negatively associated with cash usage, though only in mid-income states and that too up to a threshold,” the RBI said.
It also found that higher education levels were associated with lower demand for cash in low- and high-income states.
Wider adoption
If rising incomes and education are indeed associated with lower cash usage, UPI’s spread beyond India’s biggest economic centres is a positive sign.
The combined share of the top 10 districts in overall UPI transaction volume has fallen from a peak of 25.2% in July-September 2019 to 17.4% in April-June 2026. With overall UPI volumes continuing to grow, the declining share of the top 10 districts suggests that an increasing portion of that growth is coming from elsewhere.
A similar pattern is visible in transaction value. The share of the top 10 districts rose from about 17% in early 2018 to a peak of 32.5% in July-September 2019, just before the covid pandemic disrupted the economy and households went into lockdown.
Covid gave a major boost. As UPI spread beyond the leading economic centres, the share of the top 10 districts steadily declined, reaching 19.8% in April-June 2026. Yet the composition of the top 10 has remained relatively stable: nine of the 10 districts that ranked among the top in early 2020 remain in the top 10 today.
State mirrors
The decline in UPI share of the top 10 districts at the all-India level is also mirrored in leading states. We looked at the top 10 districts for four large states—two more affluent (Maharashtra and Tamil Nadu) and two less affluent (Uttar Pradesh and Madhya Pradesh). Here too, the share of their top 10 districts in value terms has been declining.
A caveat: the district-level data is from only one UPI application, PhonePe, which has a dominant market share, but may not be representative of the national trends.
What is also worth noting is that the trends fall in two distinct buckets. The share of the top 10 districts in the two richer states does fall, but always remains distinctly higher than the share of the top 10 districts in the two poorer states. This reveals greater concentration in top districts in richer states, signalling greater inequality. At the same time, it also underlines inequality that exists between richer and less-affluent states.
Retail rising
The data also breaks UPI transactions into three broad categories: person-to-person (P2P) payments, retail payments to merchants and utility payments. This cut is available only at the state and national levels, not at the district level.
Utility payments have consistently accounted for a single-digit share of UPI usage. Retail payments, by contrast, have grown steadily. Their share of total UPI transactions has risen from 37% in mid-2021 to 64% currently.
However, the average transaction value in retail payments—total transaction value divided by total number of transactions—has declined from ₹648 per transaction to ₹425 in the latest quarter. That is to be expected: wider adoption and deeper penetration should bring smaller-value payments onto UPI, pulling down the average transaction size.
Against this backdrop, the passage of a bill that removes the rigid blanket ban on payment charges on UPI transactions may slow down the growth, though the government has assured that the users won’t face any charges.
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