India’s flagship Unified Payments Interface (UPI), an example of effective Digital Public Infrastructure (DPI), has become a global success story and is the most preferred transaction mode in the country. But there comes a point when the highest growth and galloping expansion leave little room for further development, reaching a saturation point.
Already the most popular digital payment method, experts suggest that reaching a saturation point will not necessarily signal the end of UPI’s growth; instead, it will drive further technological advancements, like international expansion. However, UPI and similar payment methods may not necessarily remain the most preferred options for purchasing high-value items like cars and durable goods.
“UPI’s growth has been phenomenal, and while its adoption might appear saturated, innovations like UPI Lite and international UPI payments are extending its reach,” said Rohan Sharan, founder and chief executive of Timechain Labs, an on-chain application development firm utilizing BSV blockchain technology.
“Competitors in 2025, such as private digital payment solutions or even CBDCs, may challenge UPI’s dominance. However, given the government’s strategic interest in UPI, any competition is likely to coexist rather than replace it. UPI’s open architecture, continuous innovation, and wide acceptance ensure its long-term relevance, though competition may drive more user-centric features and innovations,” Sharan added.
UPI is used at all levels, from street vendors to large shopping malls, and has the highest percentage of digital transactions globally. UPI serves about 350 million individuals and 50 million merchants. UPI has seen a tenfold increase in volume over the past four years, from 12.5 billion transactions in 2019-20 to 131 billion transactions in 2023-24, or 80% of all digital payment volumes.
In October 2024, UPI processed over 16 billion transactions, marking a 45% increase compared to October 2023. Introduced in 2016, UPI offers instant money transfers and is a single mobile application for accessing different bank accounts.
‘Signs of plateauing’
“We see the growth in urban areas, where penetration is already high, showing definitive signs of plateauing. Several factors are signalling the saturation index,” Raj Kapoor, founder of India Blockchain Alliance, told CoinGeek.
“Most transactions come from frequent users paying small amounts, limiting the scope for growth in transaction numbers. Unless addressed, this might lead to a steady drop over time. Larger merchants are already on UPI, leaving small and informal businesses as the remaining untapped market. Add to that the lack of monetization: UPI operates on a zero-cost framework, making it challenging for payment service providers to scale their profitability,” Kapoor added.
‘UPI cannot remain free forever’
“Unified Payments Interface continues to dominate India’s payment landscape; however, signs of saturation are emerging as growth rates stabilize,” Sharat Chandra, founder of EmpowerEdge Ventures and a startup enabler, told CoinGeek.
“UPI cannot remain free forever. Market forces and ecosystem players would eventually push for MDR fees on UPI payments. The government’s stance will be crucial; while it aims to foster competition for improved consumer choice, it must also ensure that UPI maintains its reliability and security standards amidst emerging alternatives,” Chandra added.
A Merchant Discount Rate (MDR) is a fee that businesses pay to a payment processing company for each credit or debit transaction. This fee, usually a percentage of the transaction amount, covers the expenses associated with processing the payment.
In July 2024, Vikas Bansal, CEO of Amazon Pay India, the digital payments division of e-commerce major Amazon (NASDAQ: AMZN), stated that the introduction of an MDR for UPI transactions is essential for smaller players to receive a fair share of the value they contribute to the payments ecosystem.
Major competitors
“From the competitive landscape, the RBI’s CBDC may emerge as a major competitor, particularly for high-value or cross-border payments. Its programmable money feature could attract businesses seeking customized payment solutions,” Kapoor explained.
Platforms leveraging blockchain could also challenge UPI for niche audiences like tech-savvy users and micro, small, and medium enterprises (MSMEs).
“Companies like Paytm and PhonePe are enhancing their offerings, integrating loyalty programs, and facilitating offline access, aiming to address UPI’s gaps in rural areas. Their agile approach will slowly start eating into the UPI market share even as payment systems like Visa Direct and Mastercard Send are exploring deeper integration into India’s ecosystem, offering speed and reliability for global remittances,” Kapoor stated.
Competition to drive UPI’s innovation
“UPI’s transaction growth may plateau as it reaches market saturation. However, its versatility and established trust will keep it dominant,” pointed out Amit Kumar Gupta, a legal practitioner at the Supreme Court of India.
“Initiatives to integrate UPI with international payment systems will likely enhance its cross-border utility. Competitors like CBDC and private platforms may drive UPI to innovate further, ensuring user retention through added features like offline payments or enhanced security,” Gupta told CoinGeek.
India is looking to expand UPI use across the world so that any Indian with a UPI account can make a payment using UPI. So far, UPI has expanded to the United Arab Emirates (UAE), Peru, Mauritius, Sri Lanka, Singapore, France, Bhutan and Nepal.
In 2025, UPI may expand to another four to six countries.
UPI LITE innovation
To boost UPI payments, in December, the Reserve Bank of India (RBI) issued an amendment to the framework for facilitating small-value digital payments in offline mode, increasing the transaction limits for UPI LITE. UPI LITE is a payment solution that processes low-value transactions. The solution runs off existing UPI ecosystem protocols for mobile phones to ensure commonality, compliance and system acceptance.
“The offline framework has been updated and the enhanced limits for UPI Lite shall be ₹1,000 ($11) per transaction, with ₹5,000 ($59) being the total limit at any point in time,” RBI said.
UPI LITE is considered a customer-friendly approach, enabling low-value transactions without utilizing a remitter bank’s core banking systems in real-time while providing adequate risk mitigation.
The RBI also permitted small finance banks to extend pre-sanctioned credit lines through the UPI to expand the reach of credit on UPI. Soon afterwards, non-banking finance companies (NBFCs) in the digital lending sector requested permission from the RBI to offer pre-approved credit on the UPI platform.
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