The Transition From Cash to Digital Wallets: A Paradigm Shift in the Indian Economy

Abstract

Abstract
Despite the growing adoption of digital payment methods in India, cash remains dominant for offline transactions. Traditional cash payments are gradually being replaced by innovative solutions such as the Unified Payments Interface (UPI), which emerged after debit and credit cards. Introduced by NPCI in 2016, UPI-enabled apps began appearing in app stores through collaborations with 21 member banks. The shift to cashless transactions is reflected in Statista's Consumer Insights surveys, which show a 13-percentage point decline in POS cash transactions from 2018 to 2024. Cash on Delivery (COD) payments for online purchases also dropped by 16 percentage points. However, 76% of respondents still relied on cash for transactions in 2018, revealing that cash holds relevance for its 'precautionary' and 'store-of-value' functions. This study explores the evolution of payment behaviour, the economic impact of digitalization, and how the COVID-19 pandemic accelerated digital adoption. It also focuses on the problem of the proper ratio of cash and mobile payments and the latter's impact on the economy's development. The findings are made by literature analysis and survey questionnaires as the method applied belongs to the descriptive research area.