Walk into almost any shop in India today, a kirana store, a pharmacy, a roadside food cart and you’ll see the same thing.A small QR code taped near the counter, and a shopkeeper who barely looks up when you scan it. Nobody asks “cash or card” anymore.That everyday habit, repeated billions of times a month, tells you most of what you need to know about where India’s payments market is headed.The numbers now confirm what that scene suggests. UPI hasn’t just become popular. It has quietly taken over the checkout counter, at the direct expense of cards.
How big has UPI actually gotten
In August, UPI processed a record 24.51 billion transactions worth Rs 29.82 lakh crore, according to data released by the National Payments Corporation of India (NPCI). That’s up from 23.66 billion transactions in July, and 22% higher than the same month a year earlier.NPCI said the festive season, including Raksha Bandhan, gave volumes an extra push through everyday transfers and small gifts.
Zoom out further and the scale gets harder to grasp. UPI’s annual transaction value has gone from Rs 0.07 lakh crore in FY17 to roughly Rs 314 lakh crore in FY26, a jump of more than 4,000 times in a decade.Annual volume has grown almost 12,000-fold over the same period, according to the Press Information Bureau (PIB), the government’s official communication wing.UPI is now live in 11 countries, with Uzbekistan the latest to come on board.
Where cards actually stand today
This is where it gets specific to merchant payments, the money you spend at a shop, not what you transfer to a friend.
In July, India’s digital merchant payments market grew 19.6% year-on-year to Rs 11.73 lakh crore. Of that, UPI’s person-to-merchant (P2M) share hit a record 77.3%, up from 74.9% a year earlier.Credit cards, meanwhile, slipped to 17.7% of merchant payments, down from 19.8% the year before.Debit cards also fell, from 3.9% to 3.2%.That shift isn’t new; it’s just been building for years. Back in calendar year 2021, cards (credit and debit combined) still held 26% of merchant payment volume and 53% of merchant payment value, while UPI’s P2M volume share was 56%, according to a Worldline India report at the time.Five years later, cards have lost most of the ground they once held at the checkout counter, even though the overall payments market itself has grown many times over.
Why debit cards got hit the hardest
Debit cards have taken the biggest beating of all. Worldline’s 2025 data shows debit card usage at physical stores fell nearly 8% year-on-year, even though more than a billion debit cards are still in circulation.The report describes it plainly. Debit cards are now mostly used for cash withdrawals, not for paying at a shop.A separate SBI Research study found something similar: every Rs 1 increase in UPI transaction value reduces debit card transaction value by 14 paise.Why carry a card, remember a PIN, and wait for a machine when a QR scan takes five seconds and costs the merchant nothing?
Credit cards are shrinking as a share — but not disappearing
Here’s where India’s expenditure tale gets more interesting. Credit card spending is still growing.In May, it rose 2.6% month-on-month to Rs 2.02 trillion, and UPI P2M spending grew faster at 25.2% year-on-year against credit cards’ 6.6%, according to a report by Equirus Securities.The number of credit cards in circulation kept climbing too, up over a million in that single month, taking the total to 120.5 million.
So credit cards aren’t dying. They’re being pushed toward a different job. Average monthly spending per credit card in e-commerce runs around Rs 10,500, against roughly Rs 6,300 for point-of-sale purchases and e-commerce alone accounts for over 62% of total credit card spending.Credit cards remain the tool people reach for on bigger, more considered purchases: electronics, travel, big-ticket shopping.UPI has simply become unbeatable for the small, frequent, everyday transaction.
A market that’s actually still shallow
Notably, India’s credit card market, despite all the growth, is still surprisingly small.A recent TransUnion CIBIL report found that only one in four credit-active Indians actually owns a credit card, around 5.2 crore cardholders out of roughly 25 crore credit-active consumers.That’s far behind other markets: credit card penetration stands at 62% in Colombia, 70% in the UK, 81% in the US, and 98% in Hong Kong.
What growth there is has come less from new customers and more from existing customers taking on extra cards.Between 2016 and 2026, the number of live credit cards grew 5.1 times, but unique cardholders grew only 3.6 times, meaning banks are increasingly handing out second and third cards to people who already have one, rather than bringing in first-timers.The share of people holding three or more credit cards climbed from 12% a decade ago to 22% today.New-to-credit-card customers made up just 8% of fresh additions recently, down sharply from 26% a year earlier.
Cards are quietly becoming part of UPI
The most important shift, though, isn’t cards versus UPI — it’s cards showing up inside UPI.Since 2022, RuPay credit cards can be linked directly to UPI apps like Google Pay, PhonePe and Paytm. Scan the same QR code as anyone else, except the money comes off your credit line instead of your bank balance.It’s a small technical change with a big effect as the plastic card becomes optional but the credit product behind it survives.Only RuPay cards can do this today, Visa and Mastercard credit cards still can’t be linked to UPI, which is part of why NPCI’s own network has been gaining share of credit card volumes at the expense of global card networks.Banks have leaned into this rather than fighting it: most major issuers now offer RuPay variants built specifically for UPI spending, some with reward multipliers on QR transactions.The next step, Credit Line on UPI, goes even further letting banks extend a pre-approved credit facility through a UPI app with no card at all, physical or virtual.
So does UPI make cards less useful?
The answer honestly depends on which part of “cards” you mean. As a plastic object you carry in your wallet and swipe at a machine, UPI has already made cards close to unnecessary for daily spending in India. Debit cards especially now look like a product mostly kept alive by ATM withdrawals rather than shopping.Credit, as a financial product, is a different story. It isn’t shrinking — it’s specialising. It’s moving toward bigger purchases, travel, e-commerce, and EMIs, while simultaneously finding a second life riding on top of UPI rather than competing against it.There’s also a broader case to be made that UPI’s real impact goes beyond which instrument wins at checkout. Ashish Desai, associate professor of information management and analytics at the SP Jain Institute of Management & Research (SPJIMR), argues that UPI’s biggest contribution has been to India’s digital and financial literacy, not just its payments plumbing.Digital platforms, he says, give small merchants who were previously “digitally dark” a financial footprint that can be used for credit scoring, while every UPI transaction doubles up as a lesson in using digital tools.Bank accounts opened under schemes like Jan Dhan and Aadhaar were only half the job of financial inclusion, he notes — actual usage is the other half and that’s the gap UPI has filled.As Desai puts it, “UPI operationalises these accounts, thereby supporting financial inclusion.”
Are cards becoming obsolete?
The simple answer is no. But they are becoming less central to everyday spending.The latest merchant-payment data makes that clear. UPI has become India’s dominant digital payment method for routine purchases, while debit cards are steadily losing their role at the point of sale.Credit cards are also losing merchant-payment share, but their importance is being preserved by areas such as e-commerce, larger purchases, rewards and access to credit.The bigger change is not the disappearance of cards but the emergence of a new payment hierarchy.For everyday spending, the QR code is increasingly India’s default checkout button.Debit cards are being pushed towards the margins of merchant payments.Credit cards are moving towards online, premium and credit-led spending.And UPI itself is beginning to absorb functions traditionally associated with cards by allowing eligible credit products to operate through the same familiar payment interface.That means the future of payments may not be a battle between plastic and QR codes.The QR code may simply become the front door through which many different forms of money — bank deposits, credit cards and credit lines — eventually flow.For now, though, one thing is increasingly clear: when it comes to buying everyday things in India, the swipe is no longer king. The scan is.
