India’s alternative payments ecosystem spotlights rewards and the stored value: Tracxn Data

A new analysis of Tracxn data, commissioned by TWID, leading rewards-based payment network, highlights a structural shift that is underway in India’s alternative payments ecosystem. With UPI now mainstream, accounting for over 83% of India’s digital payment volumes in FY25 and processing 185.8 billion transactions, a 41.7% year-on-year increase, transaction scale is no longer the primary constraint. Innovation is increasingly moving beyond transaction enablement toward unlocking stored value embedded within payments, particularly across rewards, incentives, and embedded spending power.

As digital payments scale, Tracxn’s analysis points to a growing focus on how value is utilised within payment flows, not just how transactions are executed. As alternative payment models gain momentum in India, rewards-based payments have already scaled into the mainstream-driving incremental transactions, higher engagement, and stronger issuer economics. Rewards are being integrated into payment flows to improve monetization and usability, as evidenced by innovations enabling direct point-based payments for greater consumer spending flexibility. This points to a broader transition from payments as pure transaction enablement to payments that also integrate stored value and incentives, with rewards playing a more prominent role in the ecosystem.

One of the key trends identified by Tracxn is the growing integration of rewards into live payment experiences. Traditionally, rewards have remained issuer-locked or confined to catalogue-based redemptions. Newer models are changing this dynamic by enabling rewards to function as payment value at checkout, improving utilisation while aligning incentives across consumers, issuers, and merchants. 

Within this evolving landscape, Tracxn’s analysis references TWID as an example of a rewards-first approach to alternative payments. The platform enables reward points  traditionally locked within issuer-owned systems to be integrated directly into merchant checkouts, allowing stored value to be used at the point of transaction. This illustrates how rewards can be embedded into live payment flows, aligning with Tracxn’s observation of increasing convergence between payments, credit, and rewards across the ecosystem.

More broadly, Tracxn’s data shows that India’s alternative payments ecosystem is expanding across a wide range of models focused on embedding value into payment journeys. Between 2020 and 2025 YTD, more than 420 alternative payments startups have emerged, spanning rewards-based payments, credit-on-UPI, BNPL, digital wallets, QR-led solutions, and stored-value systems. This breadth indicates a focus on payment models that enhance user experiences that combine transaction execution with value activation, rather than standalone payment enablement.

“India is witnessing a shift from a payment as a basic utility to payments as a means of greater financial engagement,” said Neha Singh, Co-founder & CEO, Tracxn. “Backed by progressive regulation, global leadership in UPI, rising credit card usage, and a young, financially aware consumer base, India has become a natural growth environment for alternative payment modes. The rising investor focus further reinforces the sector's momentum, making alternative payments well positioned for sustained growth and deeper user penetration in the years ahead”, she added.

“As rewards-based payments scale across India, the real unlock is no longer accumulation - its liquidity,” said Amit Koshal, Founder and CEO of TWID. “When rewards become usable at the moment of purchase, they stop being a marketing expense and start behaving like a powerful payment instrument. This is where issuers drive incremental transactions, merchants see higher conversion, and customers experience real value - instantly.”

Funding and product activity across the ecosystem reinforces this transition. Between 2020 and 2025 YTD, the sector has raised $418 million across 88 equity funding rounds, with investor interest increasingly concentrated in platforms integrating credit, rewards, or stored value directly into payment flows. Players such as TWID (rewards), Kiwi (credit-on-UPI), and Popclub (rewards-driven platform) or Cheq (UPI wallet) illustrate how alternative payment models are evolving to reshape how value flows within a transaction.