'How India Paid in 2024': UPI rules payments, BPNL and EMIs are surging. Is this the death of cash?

Though UPI has become the go-to payment method for everyday transactions in India, BNPL(Buy Now, Pay Later) models and EMIs are making high-value purchases more accessible, and businesses are adapting to evolving consumer preferences, a study has revealed.

The way people pay in India is changing fast, and industries across the board, from retail and e-commerce to healthcare and education are embracing flexible, seamless, and digital-first payment solutions. UPI now powers the majority of retail and e-commerce payments, offering speed, security, and convenience.

At the same time, BNPL and EMI options are helping consumers manage expenses more effectively, whether it is buying electronics, paying medical bills, or funding education.

The study titled 'How India Paid in 2024' by Pune-based fintech firm Phi Commerce has revealed interesting details about key payment methods, transaction behaviors, and the impact of emerging financial technologies across various industries.

The report found that the government and utilities sector are also shifting towards automated digital payments, reducing inefficiencies and making essential services more accessible. Looking ahead, the future of payments in India is set to become even more integrated, credit-driven, and personalised. The report revealed that UPI’s dominance will only grow, credit on UPI will make borrowing more seamless, and businesses will embed financing options directly into the purchase journey. Cash usage will continue to decline, while AI-powered lending will expand access to credit for millions of new users.

The report observes that in the education segment, direct bank transfers and net banking remain the most common methods of payment, accounting for 60 per cent of tuition fee payments, particularly in traditional schools and higher education institutions. However, UPI and mobile wallets (30 per cent) are gaining popularity for smaller transactions, such as application fees, exam charges, and hostel payments, offering convenience and instant processing. Additionally, BNPL and EMI options (20 per cent) are also on the rise, especially in high-fee institutions, private universities, and ed-tech platforms, allowing parents and students to manage costs through structured instalments.

The study highlights that EMI-based fee payments are growing as parents seek manageable instalments over lump-sum tuition payments. Similarly, ed-tech platforms are driving BNPL and zero-interest EMI adoption, making learning more affordable. Institutions are partnering with fintechs to enable seamless digital fee collection and financing options.

As per the study, in the retail segment, UPI remains the dominant mode of retail transactions, accounting for 65 per cent of purchases, particularly in grocery stores, supermarkets, and convenience retail. BNPL and EMIs (20 per cent) are growing rapidly, especially in the electronics, fashion, and consumer durable segments, allowing consumers to split payments over time. Meanwhile, credit cards (10 per cent) remain a preferred choice for high-value purchases, such as furniture, appliances, and luxury goods, benefiting from cashback, rewards, and deferred payment options.

In the government and utilities payments, UPI and net banking (75 per cent) dominated, covering electricity, water, and municipal tax payments. Direct bank transfers (20 per cent) remain the preferred mode for government subsidies and welfare schemes, ensuring seamless disbursements. Credit cards (5 per cent) were used for high-value transactions, such as property taxes and premium services.

The report reveals that the food and beverage sector has fully embraced digital payments, with UPI leading transactions and BNPL emerging in food delivery and subscriptions. India’s healthcare sector is also witnessing a shift towards digital payments, with credit cards, EMIs, and BNPL emerging as essential tools for managing high medical expenses.

As healthcare costs rise, consumers are increasingly turning to structured financing options, while hospitals and clinics are adopting digital-first payment solutions for enhanced convenience and efficiency.

The report found that despite the rise of digital payments, cash still plays a role in small markets, informal businesses, and rural areas. However, its usage is steadily declining, and by 2030, cash transactions could drop below 10 per cent of all payments. Government policies promoting digital transactions, more businesses accepting UPI even in small towns and rural areas, tax compliance and incentives for digital payments encouraging merchants to move away from cash and contactless and voice-enabled payments will continue to encourage digital payments in India.