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

Summary
- The UPI platform processed 172 billion transactions in 2024, growing 46% on year.
The Unified Payments Interface (UPI) platform ended 2024 on a high, posting record transactions in December both in terms of value and volume. However, with the pace of growth in the UPI user base slowing through 2024, industry players are calling for the entry and growth of newer players and the introduction of a tiered charge on UPI transactions to sustain growth this year.
The UPI platform processed 172 billion transactions in 2024, growing 46% on year. In December, the platform processed 16.7 billion transactions worth ₹23.25 trillion, up 39% on year in terms of the volume of transactions and 28% in terms of the transaction amount.
Going into 2025 then, the prospects for UPI’s growth look strong on the back of recent initiatives such as UPI Lite, credit on UPI and UPI Circle which are especially expected to drive low cost and offline payments.
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“UPI is set to establish itself as the leading digital payment system globally by 2025, driven by increasing international adoption and innovations such as credit integration and Prepaid Payment Instruments (PPI) on UPI," said Ankush Julka, chief executive officer, MufinPay.
These advancements and those such as super apps will allow UPI to be integrated with a wide array of services thus enhancing its reach, catering to new markets and diverse user segments, he added.
Shruti Aggarwal, co-founder, Stashfin expects UPI transactions to surpass 250 billion annual transactions by the end of 2025, marking an on-year growth of over 50%. Recent regulatory actions such as hiking the limit for UPI 123Pay will enhance UPI's usability across diverse user needs, she said.
While general optimism around the growth and adoption of UPI persists, some industry players are of the view that more needs to be done in terms of sustaining this growth, making it economically feasible for ecosystem players, and curtailing issues such as cyber risks and frauds which might drive people away from the platform.
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“The kind of use cases that have been built on UPI are going to fire the growth going ahead, said Rahul Jain, chief financial officer, NTT Data Payment Services. Internationalisation of UPI is also bringing in a lot more transactions to UPI. "Growth will continue but we also have to account for the much larger base, which means that growth in 2025 could be between 8-15% compared with the strong double-digit growth seen throughout 2024," said Jain, adding that there could be some medium term impact on growth if the economy slows down.
Low cost, offline payments
“UPI’s growth momentum in 2025 will be subject to the nature of innovations that take place and measures towards security. By addressing the key challenges and leveraging its inherent scalability, UPI can continue to propel digital transformation not just in India but globally," said Mohan K, founder of payment infrastructure provider TechFini.
NPCI’s (National Payments Corporation of India) focus should then be on initiatives and features such as introducing BNPL (Buy Now Pay Later) on UPI, providing incentives for small businesses to adopt UPI, educating users and localised outreach campaigns, increased awareness and accessibility, encouraging UPI adoption in untapped sectors like public transport, healthcare, and government services, instant credit, enhanced security, and multilingual support—all of which would enhance the user experience, industry experts said.
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“Many areas still struggle with reliable internet access, which can hinder UPI adoption. By making UPI transactions smoother and more dependable, even in low-connectivity environments, more users could be encouraged to join the platform," Stashfin’s Aggarwal said, adding that focusing on areas like security and accessibility will help UPI maintain its growth and competitiveness in the digital payments space.
Mohit Bedi co-founder & chief business officer of Kiwi suggested expanding rural outreach through UPI123Pay, which allows users without smartphones to make digital payments, to drive deeper penetration in underserved areas.
“Promoting UPI Lite for senior citizens and tech-hesitant groups will also encourage adoption by simplifying transactions. These efforts will help drive UPI’s growth and engagement, especially in underserved segments," he said.
Monetisation, security
A central theme in 2025 is expected to be monetisation of UPI payments, with industry players batting for a tiered pricing model where basic P2P (peer-to-peer) transactions remain free but businesses and high-frequency users are charged nominal fees.
Bernstein Research, in a 7 January report, said that while UPI has emerged as the clear dominant mode of payments accounting for 70% of cashless payments, the payment ecosystem doesn’t earn any direct revenue from UPI payments.
The current subsidy from the government (against the free UPI transactions), which works to a combined 6-7 basis points for all the stakeholders, is the key revenue source. This coupled with the high competitive intensity in the payments space has limited profitability in the segment despite the rapid growth in volumes, the note said.
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“So far, UPI has freely given its services to users, but it needs to evolve beyond alternate revenue models. Implementation of tiered rates, either based on transaction volume or type of merchant, may also pave the middle way between affordability for consumers and returns for payment services," said Musharraf Hussain, chief operating officer at Ezeepay. He added that these shifts need to be such that they “do not frighten small users and rural users away from the system".
Protecting users of UPI also involves grappling with and managing the issue of rising cyber frauds in UPI transactions. This will include integrating AI-driven monitoring systems, strengthening user authentication through means like multi-factor authentication and biometric verification, strengthening regulatory standards to safeguard data and improve security features, increasing user awareness, and more collaboration between banks, fintechs, regulatory bodies and other stakeholders, industry experts said.
“Security is the backbone of trust in digital payments. The success of both, UPI and digital payments as a whole, will depend on its ability to anticipate and mitigate risks through a balance of collaboration and cutting-edge technology," TechFini’s Mohan said.