India has rapidly embraced UPI money transfers in the past few years. Cashless payments have replaced the need to count notes, look for change or to stand in long queues at ATMs. From big businesses to local vegetable vendors, a quick scan of a QR code completes the transaction. However, this appears to be changing as people have again started carrying cash in their wallets, again. Interestingly, people are choosing to pay via cash for specific purposes, such as travel and small purchases. Cash is finding its own way into pockets of the consumers for specific purposes.

The growth of UPI changed how India pays, buys and consumes. The method of scan and pay has come to embody the everyday payment landscape within the country. Though for consumers the appeal is simple and obvious, the frictions in digital payments are prompting many to keep cash close at hand. Srikrishna Susarla, a banker with over two decades of experience explains, “The UPI system has experienced occasional outages. It has disrupted millions of transactions. Since it relies on NPCI as a central processing authority, it has an inherent single point of failure.”

Issues such as failed transactions, money transfer limits, bank server issues and platform costs have been making cash stubbornly relevant. Vijay Agarwal, a Chartered Accountant says, “UPI has had real, recorded outages, some running hours, at year-end or peak-load moments”. Cash is now becoming a fallback for consumers as well as businesses for uninterrupted payment flow.

Cost of Going Cashless

The digital revolution, despite the convenience, has created an invisible dependence on phones. While it provides ease of pay-

ing in seconds, bills splitting instantly and maintaining a

digital record of each payment made, this dependence on the digital ecosystem also leaves users vulnerable to digital failures. UPI payments are not as cost-free as it appears. “Nothing in accounting is truly free, it's either expensed visibly or absorbed invisibly. Digital payments picked the second option,” Vijay notes.

He further adds, “As a CA,

I look at where the subsidy sits. The government has spent thousands of crores reimbursing banks for zero MDR and that cost doesn't vanish, it shifts to taxpayers.”

For consumers, interruptions in payments can quickly turn into frustration. In case of failed or incorrect transactions, resolving the issue may take time, creating complexities for both the customers and vendors. Therefore, such frictions occurring over time have contributed to creating a growing fatigue around online payment. As a result, some customers have started keeping cash as a back-up or alternative alongside UPI. “It’s insurance against the one moment it fails: a dead phone, no signal, a shopkeeper without a QR code,” says Agarwal.

The Digital Divide

People in Tier-1 cities in India with better and digitally developed infrastructure may experience fewer disruptions because of better connectivity. But, still in many parts of India, users continue to rely on 4G and 3G networks, making them more vulnerable to frequent internet connectivity disruptions and bank server issues. Vijay points, “E-invoicing, digital GST returns, UPI-first collection, all of it assumes connectivity and digital literacy that simply isn't uniform yet, especially in tier-3/4 markets.”

The geographical advantage of being in digitally equipped areas therefore raises questions about whether India is yet ready to go cashless. The digital divide is not just about access but about who can depend on it at the time of need. Srikrishna says, “The infrastructure is scaling faster in raw transaction volume than in ensuring equitable last-mile access”.

Need For Co-existence

At present, cash and UPI are not necessarily in competition with one another. Rather, they are co-existing in everyday transactions. Together, ensuring speed and certainty. Srikrishna adds, “India today is better described as ‘cash-light’ rather than truly cashless. This is an ongoing transition, not a completed transformation.”

Therefore, the measure of this transition shouldn't be the elimination of cash altogether, but how well both systems exist in tandem to increase efficiency. “Policymakers should stop measuring success by cash's disappearance and start measuring it by how well the two rails complement each other during failure,” says Vijay.

A few notes tucked into the wallet have taken on a new role of being a safety net. Today, carrying cash is less about choosing it over UPI and more about carrying it as an emergency backup.

Money Matters

• UPI handles around 84-85% of the country's total digital payments activity. (PIB India)

• Only 31% of rural households had active internet access. Rural internet penetration remains far below urban. (PIB NSSO data)

• NPCI ecosystem data shows around 1% failed transactions in 2025, while it might look small, it accounts to about millions of failed transactions. (PhonePe Business)

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