UPI surge relegates debit cards mainly to ATM use

MUMBAI: Debit cards, once the go-to-option for many Indians looking to make payments, are losing out to UPI, which has made buying and paying for things a lot easier. Today, debit cards are largely being used for cash withdrawals and some occasional purchases at stores.

Debit cards still account for more than one billion issued units, yet their PoS (point of sale) usage has stagnated, declining nearly 8% y-o-y in the Jan-June period, a report by Worldline India showed. The shift, analysts at the firm said, reflects UPI's cannibalisation of low-ticket merchant payments, especially in everyday categories.In fact, the average ticket size of UPI transactions declined from Rs 1,478 in H1 2024 to Rs 1,348 in H1 2025 pointing to the increasing use of the mode by consumers to shop for groceries, small-ticket items and pay for utility bills and services. "Smaller spends at kiranas, delivery platforms, mobility services and utilities show how QR codes have been normalised as the default payment mode," said analysts. A lot of this growth has come on the back of convenience-for merchants, onboarding is near frictionless with zero cost acceptance and instant settlement. For consumers, speed outweighs the use of cards or cash. There is a new hierarchy at play-"UPI owns frequency, credit cards capture value, and debit is relegated to cash withdrawals.

For issuers, the challenge is clear-protect relevance in a market where UPI dominates the bottom of the pyramid," experts said. In Jan-June, UPI transaction volumes touched 106.4 billion, growing 35% y-o-y while value stood at Rs 143.3 trillion. In contrast, overall PoS volumes grew 4% y-o-y to 2.3 billion in H12025. PoS growth is anchored almost entirely by credit cards, whose volumes grew 25% y-o-y to 1.3 billion; debit card usage fell 24% to 516 million. Debit cards have seen a decline even in online spaces where credit cards continue to thrive, led by premium purchases.

Going ahead, credit on UPI and small ticket BNPL (buy now, pay later) will likely divert some EMI flows from cards, said analysts. The challenge in UPI space, however, lies in managing economics.