Telangana Tops UPI Usage Intensity in India

The usage intensity of Unified Payments Interface (UPI) transactions in India has seen variation across states. Telangana leads in per capita UPI transaction volume, as revealed by a recent Reserve Bank of India (RBI) study. This trend marks the growing digital payment adoption and its impact on cash demand in the economy.

Current Trends in UPI Usage

UPI transactions have grown rapidly, especially for low-value, daily payments. The RBI paper used PhonePe data, which accounts for over half the UPI transaction volume and value in India. Telangana tops the list, followed by Karnataka, Andhra Pradesh, Delhi, and Maharashtra. These states feature urban centres and economic hubs that encourage digital payments. The rise in UPI has contributed to a steady decline in cash withdrawals at ATMs relative to GDP.

Peer-to-Merchant Payments and Transaction Size

The majority of UPI transactions are peer-to-merchant (P2M) payments, mostly below ₹500. This indicates UPI’s role in everyday small-value transactions like shopping and bill payments. Meanwhile, the average transaction size or ‘ticket size’ has been decreasing over time. This trend reflects the shift from cash to digital for routine expenses.

Regional Variations in Digital Payment Adoption

Southern and western states along with Delhi show the highest UPI intensity. These regions benefit from urbanisation, employment-driven migration, and better digital infrastructure. Conversely, northeastern states, Kerala, Goa, and parts of Delhi still show higher cash withdrawal intensity. Factors include tourism, service sector cash demand, remittance inflows, rural cash dependence, and limited digital infrastructure.

Impact on Cash Demand and Economy

The increased use of UPI is linked to the decline in cash demand. ATM cash withdrawals as a share of GDP have been falling steadily. Digital payments offer convenience and transparency, reducing the need for physical cash. This shift supports the government’s digital economy initiatives and financial inclusion goals.

Role of Payment Platforms

PhonePe dominates UPI transactions with 58% of volume and 53% of value. Its widespread usage provides a reliable proxy to study UPI trends. Other platforms also contribute but to a lesser extent. The dominance of a few platforms helps standardise digital payments across regions.