International Journal of Social Science Research (IJSSR)

Tracking India’s Digital Finance Transformation and Shift Towards a Cashless Economy

This Seeks to analyse the growth and performance of India’s online payments and e-money ecosystem, focusing on key enablers such as the Unified Payments Interface (UPI), digital wallets, mobile banking, and fintech innovations. The study has used secondary data collected from RBI macroeconomic indicators and different publications. Through data analysis and trend evaluation, the study highlights the increasing penetration of internet and smartphone usage, the rise of real-time transactions, and the evolving regulatory landscape. While the progress is notable, challenges such as cybersecurity risks, digital literacy gaps, and infrastructure limitations persist. UPI has become the cornerstone of India's digital payment ecosystem. In October 2024 alone, UPI processed over 16.5 billion transactions worth ₹23.49 lakh crore, marking a 45% year-on-year growth from the previous year. By the second half of 2024, UPI accounted for 89% of the total digital payment volume, with platforms like PhonePe, Google Pay, and Paytm dominating the market. While UPI leads in transaction volume, digital wallets and cards still play a role, contributing 11% to digital payments as of July 2024. However, their share is gradually declining as UPI's dominance increases. India's shift towards a cashless economy is evident in the exponential growth of UPI transactions, the increasing adoption of digital payments in public services, and initiatives aimed at financial inclusion. While challenges like cybersecurity threats and the need for merchant fee structures remain, the overall trajectory indicates a strong move towards a digital-first financial ecosystem. Public transportation systems are increasingly adopting digital payments. For instance, the Karnataka State Road Transport Corporation's Chamarajanagar division recorded over ₹3.2 crore in UPI transactions within five months of implementing a cashless system. Similarly, Nagpur Division of Central Railway achieved the highest share of QR code-based transactions across its zone, accounting for 22.10%. This paper concludes by assessing India’s readiness for a fully digital financial future and outlines key recommendations to sustain and enhance the momentum of its cashless journey.