India is scanning more and withdrawing less as digital payments take over

Mumbai: Software-led payment channels have pulled ahead of hardware-heavy payments network in India, as consumers and merchants migrate towards Unified Payments Interface quick response (UPI QR) codes and online card transactions, while automated teller machines (ATMs), micro ATMs and legacy acceptance infrastructure are stagnating or contracting.

The volume of reported UPI QR codes increased 16.9% year-on-year to 792.6 million at the end of June. In contrast, micro ATMs declined 8.4% to less than 1.34 million, off-site ATMs fell 6.8% to 73,426 and the overall bank ATM and cash-recycler network remained virtually unchanged at about 210,000, according to the Reserve Bank of India data.

"India's transition toward cashless payments remains firmly intact, with total payment value growing by 22% in FY26, taking the cashless payments-to-GDP (gross domestic product) ratio to 35%," said Pranav Gundlapalle, head of India Financials at Bernstein. "While UPI P2P (peer-to-peer) transactions and bank transfers grow at a steady pace, UPI payments accounted for the bulk of incremental growth. In contrast, cash-based transactions continue to decline, with ATM withdrawals falling by 11% in volume terms."


The shift is also visible in transaction behaviour. Credit-card e-commerce volume surged 30.6% during the year and online purchases accounted for about 63% of total credit-card spending. Meanwhile, debit-card transactions at physical point-of-sale terminals declined 12.3% and debit-card ATM withdrawals fell 8.6%.

Within the ATM network, banks appeared to be shifting capacity towards branches. On-site ATMs and cash recyclers increased 3.9% year-on-year to about 136,000, while off-site machines declined 6.8% to 73,426. Micro ATMs recorded a sharper contraction, declining 3.8% during the June quarter and 8.4% over the year.

"There is a fundamental change in India's payment architecture: incremental growth is increasingly being captured by software-based QR and online channels, while hardware-intensive cash and merchant-acceptance networks are being rationalised," said Prakash Agarwal, partner at consulting firm Gefion Capital.