A digital payment system in India is an effort to move towards cashless economy by minimizing the use of cash in physically. The reason is that to adopt electronic transaction in payment system, because it brings efficiency and transparency in transactions as well it enables faster growth and development of the economy. The study attempts to evaluate the e-transaction system in India along with methods of digital payments, recent trends which are associated with digital transaction and challenges in making India as a cashless economy. The study based on secondary source of data. Study reveals that India is still lacking behind in electronic transactions, but after the demonetization (2016) there is a positive sign have been seen in the using of digital transactions. The study recommends that government should promote and encourage their agencies and private sector service providers to widen financial literacy at a great extend.