India has emerged as the global leader in real-time retail payments, powered by the Unified Payments Interface (UPI), according to a new report from the International Monetary Fund. The IMF’s June 2025 Fintech Note highlights UPI’s interoperable design as a central factor in achieving over 18 billion digital transactions each month in India—more than any other country.
Interoperability allows users of different banks and apps to transact seamlessly. Unlike closed-loop systems that require both sender and receiver to use the same provider, UPI's open framework enables free movement across platforms. This not only boosts convenience but also fosters competition among app developers, encouraging innovation and quality improvements, the report says.
"UPI now processes more than 18 billion transactions per month and dominates other electronic retail payments in India. India now makes faster payments than any other country. At the same time, proxies for cash usage have fallen. Prior work has not considered the role of interoperability in driving this rapid growth, instead focusing on demographics and the demonetization shock," IMF notes.
The IMF notes that UPI’s structure—built on the Immediate Payment Service (IMPS) infrastructure—offers both "direct benefits" to users (like app choice and improved reliability) and "indirect benefits" by motivating providers to reduce transaction failures and introduce features like QR payments and sound notifications.
Evidence from 2023–24 shows users migrated from their banks' apps to fintech platforms offering better functionality. Apps with lower transaction decline rates saw higher usage, underscoring user preference for quality. New entrants were also able to gain market share despite incumbents, thanks to the system’s openness.
India’s journey was supported by foundational reforms such as Aadhaar-linked digital IDs, the Jan Dhan Yojana bank account scheme, and a sharp drop in mobile data costs, which together created a conducive environment for digital financial inclusion.
While UPI's success is being studied globally, the IMF cautions against complacency. Market concentration—few apps (Google Pay and PhonePe) now dominate the majority of volume—could erode user choice. The report urges ongoing regulatory vigilance to preserve interoperability and fairness in the ecosystem.
