Authors:  Abdur Rehman, Prathinav Meshram, Riya Verma, Shreenedhi V, Sonia Agarwal, Aswathypadma Anil, Ananya Sharma, Ayush Chaudhary Abstract This study examines the changing consumer payment environment in India following the rapid expansion of the Unified Payments Interface (UPI) between 2016 and 2025. Rather than treating the growth of UPI transactions as direct evidence of higher consumption, the study distinguishes payment substitution from changes in spending behaviour. It asks whether the increasing availability of fast, interoperable and low-friction digital payments has altered the frequency, size and everyday character of consumer transactions. The study uses secondary data drawn from the National Payments Corporation of India (NPCI), the Reserve Bank of India (RBI), government publications and relevant academic literature. Particular attention is given to the growth of UPI transaction volume and value, the changing role of person-to-person (P2P) and person-to-merchant (P2M) payments, and the expansion of digital payment infrastructure. The analysis indicates that UPI has substantially changed the payment environment by making digital transactions more accessible and increasingly embedded in routine economic activity. The growth of P2M payments also suggests a wider movement of digital payments into everyday consumption. However, aggregate transaction growth cannot by itself establish that consumers spend more in total, because transaction counts may reflect the replacement of cash or other payment modes and changes in transaction frequency. The study therefore argues that UPI is best understood as an important factor in the reconfiguration of payment practices, while its precise effect on overall consumer expenditure requires further empirical investigation. Keywords: Unified Payments Interface (UPI); Consumer Spending Behaviour; Digital Payments; Payment Substitution; P2P Payments; P2M Payments; Digital Economy; India Introduction India’s payment system has undergone a major transformation during the last decade. For a long period, cash remained central to everyday economic activity, particularly for small-value purchases and informal transactions. The expansion of smartphones, internet connectivity, digital banking and payment infrastructure has gradually changed the payment environment. A major turning point came with the introduction of UPI in 2016. Developed by NPCI, UPI enabled interoperable, account-to-account payments through mobile applications and created a common infrastructure for transferring money and making merchant payments. Its subsequent expansion has made digital payment an increasingly routine part of economic activity in India. The growth of UPI has been particularly significant because it combines speed, interoperability and convenience within a single payment system. Users can initiate payments directly from bank accounts without relying on cash or entering lengthy banking details for every transaction. The increasing availability of QR-based merchant payments has also extended digital transactions beyond formal online commerce into shops, local businesses, transport, food services and other everyday settings. RBI reported that UPI accounted for 79.6% of the volume of retail payments in 2023–24, indicating its central position within India’s retail payment ecosystem. The RBI’s Digital Payments Index also increased from a base value of 100 in March 2018 to 465.33 in September 2024, reflecting the broader expansion of digital payment infrastructure and usage. The expansion of UPI raises an important question about consumer payment behaviour. A change in the method through which a purchase is paid for does not necessarily mean that the amount spent by a consumer has increased. If a person previously paid ₹100 in cash and now pays the same ₹100 through UPI, the payment mode has changed but the expenditure has not. This distinction between payment substitution and behavioural change is important when interpreting the rapid growth of UPI. Aggregate transaction statistics record the number and value of payments, but they do not directly reveal whether consumers are purchasing more goods and services, making smaller purchases more frequently, or simply replacing cash and other payment methods with UPI. Therefore, the present study uses transaction volume, transaction value and average transaction size as observable indicators of changes in the payment environment rather than as direct measures of total consumer expenditure. At the same time, the characteristics of digital payments may influence the way payments take place. Digital payments reduce the physical and transactional effort associated with making a payment. A consumer can complete a small purchase by scanning a QR code or using a mobile application within seconds. Such convenience may make frequent low-value transactions easier to conduct and may contribute to the normalisation of digital payments in everyday economic activity. However, whether this convenience results in changes in spending behaviour cannot be established from aggregate UPI growth alone. It therefore requires careful examination of transaction patterns alongside existing evidence on consumer behaviour. The distinction between P2P and P2M transactions is particularly relevant in this context. P2P payments mainly involve transfers between individuals, whereas P2M payments involve payments from individuals to merchants. Therefore, the expansion of P2M transactions can provide a more direct indication of the growing role of UPI in consumer and merchant transactions than overall UPI volume alone. However, P2P and P2M data are not available in a consistent form for the entire study period. For this reason, the study treats P2P and P2M patterns as supplementary evidence rather than as a complete measure of changes in consumer spending. The period from 2016 to 2025 is also important because UPI developed through several stages. Its early adoption was followed by broader expansion of digital payment infrastructure,increasing smartphone and internet use, and a rapid shift towards contactless transactions during the COVID-19 period. The growth of QR-code acceptance further strengthened the integration of UPI into physical markets. RBI data show that UPI QR codes increased by 35% during 2023–24 to 34.6 crore by March 2024. By June 2024, UPI was processing close to 45 crore transactions per day, while by September 2024 the number of active UPI QR codes had reached approximately 61 crores. These developments indicate that UPI is no longer limited to occasional digital transfers and has become increasingly embedded in routine payment activity across different economic settings. Existing research on digital payments often examines adoption, convenience, security, financial inclusion and consumer attitudes. A growing body of recent research has also considered whether digital payments influence spending frequency,