Over the past few years, the National Payments Corporation of India ( NPCI) has introduced multiple features—UPI Lite, wallet-based payments, recurring payments via UPI, UPI through RuPay credit cards and UPI Circle. These features are aimed at reducing banking system load for small transactions and enhancing network efficiency.
Yet, only recurring payments and credit cards on UPI have shown notable growth. The rest struggle to gain traction due to limited adoption.
“Across both wallet-based UPI payments and UPI Lite, around 100 million transactions occur monthly. The growth is slow compared to the main UPI platform,” said a senior banker from a private sector lender.
Data sourced by ET shows that in April, around 120 million UPI transactions were made through mobile wallets or prepaid payment instruments (PPIs) to settle transactions worth around Rs 4,000 crore. Wallet-based UPI payments allow consumers to pay via mobile wallets to reduce bank statement clutter.
“These are early days. Once merchant payments and credit features are integrated, transaction numbers will rise significantly,” said another banker.
UPI Lite, which eliminates the need for a second authentication factor for small payments, saw 80-90 million transactions per month, or just 0.5-0.6% of overall UPI volume. In April alone, UPI reported 17 billion transactions worth Rs 23.9 lakh crore. Launched in September 2022, UPI Lite aimed to simplify small payments, but limited awareness has hindered its adoption.
NPCI also launched UPI Lite X for offline transactions.
Meanwhile, UPI Circle, launched at the Global Fintech Fest last year, lets secondary users—like children or domestic help—make payments from a primary user’s account while protecting against fraud. However, it currently records only a few hundred thousand transactions per month.
Most of these features were designed to reduce banking system load or expand UPI’s user base. However, changing consumer behaviour has proven challenging.
Also Read: ET Explainer: Behind UPI-first digital payment apps’ latest plan to revamp their mobile wallet operations
Green shoots
One successful feature is UPI Autopay, used for recurring payments like OTT subscriptions and financial transactions. “Around 40 million new mandates are registered on UPI every month, mainly for OTT platforms and financial services,” said a third banker. Autopay has grown as it eliminates OTP requirements for transactions up to Rs 1 lakh, and up to Rs 15,000 for merchant payments.
RuPay credit cards on UPI have also seen traction after central bank allowed the move only for RuPay cards. Industry estimates suggest around 150-160 million RuPay credit card transactions occur via UPI. SBI Card reported a fourfold increase in UPI-based card spends last year, with 75% of active RuPay cards on UPI coming from tier-two cities and beyond.
Barriers to growth
The zero merchant charge, or merchant discount rate (MDR), mandate continues to discourage fintechs from heavily investing in promoting UPI features. “Most large fintechs are avoiding major promotions or cashback initiatives due to zero MDR. As a result, these new features remain underutilised,” said a banker.
PhonePe, the largest UPI app, spent Rs 15 crore on incentives for payments in FY2024, while Paytm’s marketing spend dropped from Rs 300 crore in FY2024 to Rs 151 crore in FY2025.
Another bottleneck is the unresolved issue of merchant payment interchange for wallet-based UPI. Despite discussions, stakeholders have not agreed on a revenue-sharing model, with banks, fintechs, and NPCI struggling to find a middle ground.
“There has been no decision on the interchange rate for five months,” said the third banker.
Banks are increasingly wary of the costs associated with NPCI’s frequent product launches. “Every year, NPCI introduces new features that we are expected to implement. However, maintaining these platforms is costly, and without significant uptake, there is no return on investment,” said the first banker.
Additionally features like wallet payments on UPI are stuck at the level of banks not being able to zero in on the final interchange on merchant payments. ET had reported in January that industry stakeholders were pushing an interchange of 0.6-0.7% on each of these transactions. Interchange would mean there is a revenue sharing between the stakeholders.
Yet, only recurring payments and credit cards on UPI have shown notable growth. The rest struggle to gain traction due to limited adoption.
“Across both wallet-based UPI payments and UPI Lite, around 100 million transactions occur monthly. The growth is slow compared to the main UPI platform,” said a senior banker from a private sector lender.
Data sourced by ET shows that in April, around 120 million UPI transactions were made through mobile wallets or prepaid payment instruments (PPIs) to settle transactions worth around Rs 4,000 crore. Wallet-based UPI payments allow consumers to pay via mobile wallets to reduce bank statement clutter.
“These are early days. Once merchant payments and credit features are integrated, transaction numbers will rise significantly,” said another banker.
UPI Lite, which eliminates the need for a second authentication factor for small payments, saw 80-90 million transactions per month, or just 0.5-0.6% of overall UPI volume. In April alone, UPI reported 17 billion transactions worth Rs 23.9 lakh crore. Launched in September 2022, UPI Lite aimed to simplify small payments, but limited awareness has hindered its adoption.
NPCI also launched UPI Lite X for offline transactions.
Meanwhile, UPI Circle, launched at the Global Fintech Fest last year, lets secondary users—like children or domestic help—make payments from a primary user’s account while protecting against fraud. However, it currently records only a few hundred thousand transactions per month.
Most of these features were designed to reduce banking system load or expand UPI’s user base. However, changing consumer behaviour has proven challenging.
Also Read: ET Explainer: Behind UPI-first digital payment apps’ latest plan to revamp their mobile wallet operations
Green shoots
One successful feature is UPI Autopay, used for recurring payments like OTT subscriptions and financial transactions. “Around 40 million new mandates are registered on UPI every month, mainly for OTT platforms and financial services,” said a third banker. Autopay has grown as it eliminates OTP requirements for transactions up to Rs 1 lakh, and up to Rs 15,000 for merchant payments.
RuPay credit cards on UPI have also seen traction after central bank allowed the move only for RuPay cards. Industry estimates suggest around 150-160 million RuPay credit card transactions occur via UPI. SBI Card reported a fourfold increase in UPI-based card spends last year, with 75% of active RuPay cards on UPI coming from tier-two cities and beyond.
Barriers to growth
The zero merchant charge, or merchant discount rate (MDR), mandate continues to discourage fintechs from heavily investing in promoting UPI features. “Most large fintechs are avoiding major promotions or cashback initiatives due to zero MDR. As a result, these new features remain underutilised,” said a banker.
PhonePe, the largest UPI app, spent Rs 15 crore on incentives for payments in FY2024, while Paytm’s marketing spend dropped from Rs 300 crore in FY2024 to Rs 151 crore in FY2025.
Another bottleneck is the unresolved issue of merchant payment interchange for wallet-based UPI. Despite discussions, stakeholders have not agreed on a revenue-sharing model, with banks, fintechs, and NPCI struggling to find a middle ground.
“There has been no decision on the interchange rate for five months,” said the third banker.
Banks are increasingly wary of the costs associated with NPCI’s frequent product launches. “Every year, NPCI introduces new features that we are expected to implement. However, maintaining these platforms is costly, and without significant uptake, there is no return on investment,” said the first banker.
Additionally features like wallet payments on UPI are stuck at the level of banks not being able to zero in on the final interchange on merchant payments. ET had reported in January that industry stakeholders were pushing an interchange of 0.6-0.7% on each of these transactions. Interchange would mean there is a revenue sharing between the stakeholders.
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