India’s cost panorama has undergone a profound transformation over the previous years, marked by government-led infrastructure modernization, the rise of digital funds, and the speedy growth of the fintech sector.

A brand new report by PwC and International Fintech Fest offers an summary of India’s evolving funds panorama, emphasizing the simultaneous rise of digital funds, particularly the Unified Funds Interface (UPI), and the persistent use of money.

It additionally appears to be like on the emergence of the ecosystem-based enterprise fashions, and identifies areas of future progress, together with bank cards, synthetic intelligence (AI) purposes, and new UPI use instances, all of the whereas warning of the brand new dangers accompanying these developments.

Money in circulation continues to develop

Regardless of speedy progress of digital funds, money stays extensively used and continues to develop. In 2025, money in circulation totaled INR 37.2 trillion (US$420 billion) in worth and 292 billion in quantity. These figures mark a 19% year-over-year (YoY) improve in worth, and a 5% YoY improve in quantity, extending an upward pattern noticed over the previous decade.

Sure segments, together with micro retailers, rural shoppers, and older generations, are main this pattern, with states like Uttar Pradesh, New Delhi, and Bihar seeing notably excessive utilization.

Money additionally stays standard throughout the formal financial system, the place digital funds are extra frequent, largely as a consequence of greater ranges of belief. Retailers, specifically, favor the cost technique to keep away from prices related to digital funds, together with service provider low cost fee (MDR), and machine rental charges.

The MDR payment, collected by the service provider financial institution and shared with the financial institution that issued the cardboard, the cost community, and the point-of-sale (POS) supplier, usually ranges between 1% to three% of the transaction quantity.

Moreover, money stays a most well-liked cost mode in sure sectors like jewellery, the place over 60% of transactions are in money, regardless of rules requiring purchases above INR 200,000 (US$2,259) to cite the customer’s everlasting account quantity (PAN).

As India’s cost panorama continues to evolve, the report predicts that whereas money might “now not be the only real ‘king’”, its utility will persist alongside rising digital strategies like UPI. A balanced coexistence is anticipated, with money persevering with to serve particular transactional wants like financial savings, whereas digital funds rise in prominence owing to its comfort and effectivity.

A necessity for investments in AI in funds and fraud prevention

UPI transactions have elevated significantly over the previous years. Prior to now yr alone, these transactions have seen a 42% improve in quantity and 30% improve in transaction worth.

UPI now leads retail funds, accounting for 85% of all digital transactions in India. Its ecosystem spans practically 700 banks and serves 491 million people and 65 million retailers, making it one of many world’s largest real-time cost techniques by way of quantity.

With improvements corresponding to biometric authentication, Web-of-Issues (IoT) enabled funds and cross-border remittances, UPI is effectively on monitor to clock 1 billion transactions per day by 2028, totaling 118.8 billion transactions that yr and an estimated INR 342.6 trillion (US$3.9 trillion) in annual worth, the report says.

The expansion of UPI, coupled with rising digital cost adoption and rising penetration of bank cards, has made the sector enticing to buyers. In response to the report, AI-driven funds and fraud prevention are poised to grow to be the following main progress drivers, propelling India’s cost {industry} into its subsequent section in an more and more mature and aggressive market.

The cost vertical has been persistently among the many high three recipients of fintech funding in India since a minimum of 2021, aside from 2023 and 2024. In H1 2025, it led deal exercise, accounting for about 35% of funding, or US$520 million, in accordance to knowledge from KPMG.

Cost emerges as a strategic instrument

As soon as dominated by banks and expertise corporations, India’s cost sector is now attracting gamers from numerous fields, together with retail, telecommunications, fintech, and e-commerce. Cost capabilities are more and more seen as a strategic instrument to draw new prospects, income growth, and buyer retention.

Telcos are launching cost companies and cell wallets, leveraging their huge subscriber bases and distribution networks to deliver monetary companies to underserved populations. E-commerce platforms are constructing in-app cost techniques, providing digital wallets, purchase now, pay later (BNPL) preparations, and co-branded bank cards to simplify checkout and foster loyalty. Lastly, social and messaging apps are integrating peer-to-peer (P2P) and service provider UPI funds instantly inside their platforms, leveraging their excessive person engagement to show communication channels into monetary channels.

This cross-industry participation is accelerating monetary inclusion, increasing service provider acceptance, and driving digital adoption in smaller cities. It’s making a extra dynamic, user-centric and interconnected funds ecosystem in India, the place the boundaries between commerce, communication and finance are more and more blurred, spurring innovation and enhancing accessibility.

Nonetheless, heightened competitors can be placing stress on {industry} gamers. Over the long run, pure-play cost gamers might want to differentiate themselves via progressive merchandise, add helpful options, growth into underserved buyer segments, and associate with others to succeed in extra prospects, the report says.

Credit score companies, UPI use instances, AI amongst high progress areas

As a part of the report, PwC surveyed greater than 170 people within the Indian funds and fintech area. It revealed that {industry} stakeholders consider that the following wave of cost transformation in India shall be spearheaded by bank cards, with 65% of respondents rating them as the highest progress mode. The affect of AI is one other dominant theme, as 73% of respondents anticipate generative AI and agentic AI to considerably affect the funds panorama.

UPI will even stay central to the Indian cost panorama, with new use instances rising. 22% of contributors recognized cross-border transactions as a pivotal new use case. That is supported by a positive regulatory setting, the place 70% of respondents consider that tokenization and the RuPay-UPI linkage are high enablers.

In 2022, the Nationwide Funds Company of India (NPCI) together with Reserve Financial institution of India (RBI) launched UPI funds by way of bank cards on RuPay, India’s card cost community, increasing acceptance to hundreds of thousands of retailers at low value.

Credit score-based companies are additionally seen as main alternatives for UPI, with 17% of respondents citing micro-credit and purchase now, pay later (BNPL) on immediate cost rail as a key pivotal use case. These companies would permit shoppers underserved by the standard banking sector to make purchases, and handle money movement extra flexibly. For retailers, they’d open new income streams and allow low-cost, high-volume credit score distribution via a trusted, extensively used platform.

Rising fraud dangers

The rise in digital funds in India has been accompanied by a rise in fraud. Fraudulent transactions reached 2.4 million in 2025, marking a 20% improve from 2 million in 2024.

A number of initiatives have been launched to handle this challenge. RBI has mandated that monetary establishments providing real-time gross settlement (RTGS) and nationwide digital funds switch (NEFT) companies undertake a beneficiary account identify verification system by April 01, 2025.

In parallel, RBI is making ready the launch of the Digital Funds Intelligence Platform (DPIP), a system which leverages AI to flag dangerous transactions and improve real-time fraud danger administration. The platform analyzes knowledge from a number of sources to challenge pre-transaction alerts, serving to banks and prospects resolve whether or not to proceed.

Lastly, RBI’s MuleHunter.ai is an AI and machine studying (ML) powered instrument designed to establish mule accounts extra successfully. The instrument makes use of 19 distinct behavioral patterns related to mule accounts to identify suspicious actions in actual time.

Featured picture: Edited by Fintech Information Singapore, primarily based on picture by freepik and surajbhujel by way of Freepik