UPI ends 2025 at record highs, but outages, fraud and fee concerns loom

India’s Unified Payments Interface (UPI) ended 2025 with record-breaking numbers, firmly entrenching itself as the backbone of everyday digital payments. Yet beneath the headline growth, mounting concerns over system outages, rising fraud and emerging cost pressures are raising questions about the sustainability and resilience of the ecosystem.

December turned out to be the biggest month ever for UPI, with transaction volumes touching an all-time high of 21.6 billion, up from 20.47 billion in November. Transaction value also climbed sharply to about Rs 28 lakh crore, surpassing the previous peak recorded in October. On average, Indians made nearly 698 million UPI payments a day during the month, underscoring how deeply the platform is woven into daily life.

However, the average transaction size slipped further to around Rs 1,293, reflecting a structural shift rather than a slowdown. Analysts say the decline highlights UPI’s growing role in small, routine purchases such as groceries, fuel, dining and local transport, rather than large-value transfers.

On an annual basis, the scale-up has been dramatic. Total UPI volumes jumped from about 172 billion transactions in 2024 to over 228 billion in 2025, while transaction value rose from roughly Rs 247 lakh crore to nearly Rs 300 lakh crore. Despite the high base, volumes grew nearly 30 per cent year-on-year and values by just over 20 per cent, signalling continued adoption driven by behavioural change rather than ticket size inflation.

Yet December also marked the second time in 2025 that volume growth dipped below the 30 per cent mark, pointing to a gradual normalisation after years of hypergrowth.

While UPI’s reach has expanded rapidly, operational cracks have become harder to ignore. The platform suffered repeated system outages during the year, including multiple incidents in a single month, disrupting payments for a large majority of users. Small merchants and daily wage-dependent businesses were among the worst hit, as failed transactions directly affected cash flows.

Fraud has emerged as an even more serious challenge. Official data indicate that digital payment fraud linked to UPI surged sharply, affecting an estimated one in five Indian families. More than 13 lakh fraud cases were reported in 2024–25, with losses exceeding Rs 1,000 crore. Experts warn the real scale may be much higher, as many victims do not report incidents due to lack of awareness or fear of stigma. Phishing links, fake customer care calls and PIN compromises remain the most common methods.

Regulatory and structural issues have also come under scrutiny. Concerns have been raised about the National Payments Corporation of India’s dominant position and the cautious approach to approving new UPI apps after earlier surges in application programming interface (API) usage contributed to system stress. Persistent vulnerabilities in pull-payment mechanisms have prompted repeated deadline extensions for tighter safeguards.

At the same time, the cost-free nature of UPI, long touted as its biggest strength, is facing quiet pressure. While standard peer-to-peer and bank-to-merchant UPI payments remain free for customers under NPCI guidelines, some private banks have begun levying small charges on users who exceed a monthly threshold of peer-to-peer transactions. Merchants, meanwhile, continue to bear interchange fees on wallet-based UPI payments above specified limits, even as proposals to introduce a broader merchant discount rate remain politically sensitive and unresolved.

Authorities and the industry are responding with upgrades. The rollout of UPI 3.0, tighter information security norms, mandatory annual audits, AI-based fraud detection tools and clearer beneficiary name displays are aimed at restoring confidence. UPI is also pushing ahead with global expansion, seeking interoperability across more than a dozen countries.

Still, as UPI cements its dominance and transaction volumes continue to climb, experts caution that growth alone cannot be the sole metric of success. Without stronger infrastructure, faster grievance redressal and more robust fraud prevention, the very ubiquity that made UPI indispensable could become its biggest vulnerability.

With agency inputs