UPI Overtakes Debit Cards in India as Usage Shifts to Cash Withdrawals

A recent report by Worldline India highlights a significant decline in the usage of debit cards for point-of-sale (PoS) transactions in India, with a drop of nearly 8% year-on-year during the January-June period. This trend indicates that UPI has successfully taken over many low-value merchant payments, especially for daily necessities.

The average ticket size for UPI transactions has also decreased, suggesting its increasing adoption for smaller purchases. Analysts note that QR codes, facilitated by UPI, have become the default payment method due to their ease of use for merchants (near-frictionless onboarding, zero-cost acceptance, instant settlement) and speed for consumers.

This has led to a new hierarchy in payments: UPI dominates frequency, credit cards capture value, and debit cards are relegated primarily to cash withdrawals. Issuers of debit cards face the challenge of maintaining relevance in a market where UPI is rapidly growing.

In contrast to the debit card decline, UPI transaction volumes surged by 35% year-on-year, reaching 106.4 billion in the first half of 2025. Overall PoS volumes grew 4%, but this growth was almost entirely driven by credit cards, whose volumes increased by 25% to 1.3 billion, while debit card usage plummeted by 24% to 516 million.

Looking ahead, credit on UPI and Buy Now, Pay Later (BNPL) schemes are expected to divert some equated monthly installment (EMI) flows from credit cards, further altering the payment landscape.

Impact: This trend significantly impacts banks and financial institutions that issue debit cards, potentially affecting their fee income and customer engagement strategies. It also highlights the growing dominance of digital payment platforms in the Indian economy. Rating: 8/10

Difficult Terms Explained: * **PoS (Point of Sale):** The location or terminal where a retail transaction takes place, such as a card reader in a store. * **y-o-y (year-on-year):** A comparison of a specific metric from a period to the corresponding period in the previous year. * **cannibalisation:** When a new product or service offered by a company reduces the sales or market share of its existing products or services. Here, UPI is reducing debit card usage. * **kiranas:** Small, neighborhood grocery stores common in India. * **BNPL (Buy Now, Pay Later):** A short-term financing option allowing consumers to purchase goods and pay for them in installments over time. * **EMI (Equated Monthly Installment):** A fixed amount of payment made by a borrower to a lender at a specified date each month, used for loans or credit card repayments.