The Role of UPI in Promoting Cashless Transactions among Small Businesses – A Transaction-Cost and Technology Adoption Perspective

Javed Sadat; Saneem Fatima; Mohd Athar; Abdullah Imran

doi:10.36948/ijfmr.2026.v08i05.88791

The Role of UPI in Promoting Cashless Transactions among Small Businesses – A Transaction-Cost and Technology Adoption Perspective

Author(s)	Mr. Javed Sadat, Prof. Saneem Fatima, Mr. Mohd Athar, Mr. Abdullah Imran
Country	India
Abstract	Abstract The Indian Unified Payments Interface (UPI) has seen its volume grow from a total of roughly ₹21.3 lakh crore worth of transactions in the fiscal year 2019-20 to more than ₹213 lakh crore in January 2025, where India accounts for around 40% of real-time payments in the world. A good deal of this rise can be attributed to person-to-merchant transactions facilitated by initiatives such as the zero merchant-discount rate system and the ₹1,500 crore program for incentivizing low value UPI transactions from consumers to small merchants in FY 2024-25. Yet, whether this overall rise in volume reflects true and continued adoption by the country’s smallest firms – namely kirana stores, street hawkers, and micro businesses that do not maintain financial records – is relatively unexplored. Most of the research on this issue focuses on data from consumers rather than merchants.. The present study seeks to fill the gap via a secondary data synthesis based on NPCI transaction statistics, the Reserve Bank of India and Ministry of Finance reports, and the empirical literature on digital payments and MSME finance. The theoretical framework of this work will be informed by both a transaction-cost and a technology-acceptance perspective. UPI will be considered not just as a payment system but as a tool reducing costs of searching, processing, securing and reconciling transactions that previously were connected to using cash. The adoption of this technology will be discussed in relation to performance expectancy, effort expectancy, social influence, and facilitating conditions as per the Unified Theory of Acceptance and Use of Technology (UTAUT). The paper will attempt to collect information from available secondary sources regarding the patterns of merchant-side UPI adoption, outline barriers to its use that have been highlighted in previous research and prevent small business owners from making a complete transition from cash to digital payments and report on the correlation found between UPI transaction history and formal credit access.
Keywords	UPI – cashless transactions – small businesses – MSMEs – transaction cost – technology adoption – merchant discount rate
Field	Business Administration
Published In	Volume 8, Issue 5, September-October 2026
Published On	2026-10-03
DOI	https://doi.org/10.36948/ijfmr.2026.v08i05.88791

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The Role of UPI in Promoting Cashless Transactions among Small Businesses – A Transaction-Cost and Technology Adoption Perspective

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