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Digital payments have emerged as the dominant mode of retail transactions in India, contributing 99.8% of total transaction volumes in the first quarter of FY26, according to a report released by CareEdge Analytics and Advisory.
The report attributes this significant shift to strong policy support, robust digital infrastructure, and the growing penetration of fintech solutions across the country. In terms of transaction value, digital payments accounted for 92.6% of total retail payments during the same period, further highlighting the marginalisation of traditional paper-based instruments such as cheques.
Unified Payments Interface (UPI) continues to lead this transformation, recording 54.9 billion transactions in Q1 FY26 alone. Over the full financial year FY25, UPI facilitated 185.9 billion transactions, underlining its widespread acceptance and utility across both urban and rural areas.
"UPI transactions have registered a phenomenal 49% compound annual growth rate (CAGR) between FY23 and FY25, underscoring rapid adoption with rising internet penetration as well as deepening usage in tier 2 and tier 3 cities," said Tanvi Shah, Senior Director at CareEdge Research.
Other digital payment platforms, including Aadhaar-enabled Payment System (AePS) and Immediate Payment Service (IMPS), have also contributed to the growth in digital transaction volumes.
The report notes that India’s internet penetration has grown from 60.7% in March 2021 to 70.9% in June 2025, and that the increased adoption of smartphones has played a critical role in extending digital financial services to previously underserved populations.
With digital payment methods continuing to gain traction across the country, CareEdge expects UPI and similar platforms to maintain their growth momentum and further entrench their position in India's evolving financial ecosystem.
