With the rapid growth in digital transaction volumes, the National Payments Corporation of India has extended the deadline for implementing a cap on UPI-based apps by two years, now set for December 31, 2026. This is the second time that the deadline is being revised. The decision brings relief to market leaders like PhonePe and Google Pay which dominate the digital transaction space, processing 84.8% of transactions as of November.
India’s real-time payments system has witnessed exceptional growth in recent years, with UPI clocking 155.44 billion transactions by November this year—a 32.2% increase from the 117.58 billion transactions recorded in 2023. Launched in 2016, UPI has transformed digital payments in India, seamlessly integrating into the daily lives of millions. Its widespread adoption has made it possible to envision a cashless economy on an unprecedented scale.
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As the adoption of digital payments system continues to surge, it has been hailed as a critical tool for India’s aspirations to become a global leader in financial technology.
UPI and India’s global aspirations
India’s diplomatic strategy has increasingly intertwined with its economic policy, particularly in financial technology. Recognising the global potential of the payments system, NPCI is now actively working to export this transformative payments system. The objective is to enhance India’s position as a trusted partner in digital finance, with several countries expressing interest in adopting the payments system. These include Japan, UAE, Singapore, Bhutan, France, Mauritius, Sri Lanka, and the Maldives, all of which aim to modernise their financial systems. Nepal’s adoption of UPI as the first country to integrate the system outside India exemplifies its global appeal.
India’s efforts to promote it internationally represent a significant step toward technological diplomacy. By aiding other nations in implementing the system, India can emerge as a global leader in scalable and secure digital payment solutions. For instance, the recent introduction of the payments system in the Maldives, following an agreement signed during external affairs minister S Jaishankar’s visit, highlights how UPI can deepen economic ties and strengthen India’s image as a reliable innovation partner.
Transforming global payments
UPI’s potential extends beyond domestic use. It can play a pivotal role in streamlining international trade by addressing inefficiencies in cross-border payments. Traditional systems like SWIFT are often slow, expensive, and inaccessible to smaller businesses and individuals in developing countries. In contrast, Unified Payments Interface’s open payments framework offers an inclusive alternative with instant, low-cost transactions, reducing trade barriers for emerging markets.
Designed for scalability, the instant payments system can handle a billion users and supports various identifiers such as mobile numbers, Aadhaar numbers, and virtual payment addresses, ensuring interoperability across different platforms. This flexibility makes it an attractive solution for large-scale deployment in international markets.
Moreover, UPI’s success in promoting financial inclusion in India—bringing millions into the formal banking system—can be replicated globally, particularly in underbanked regions. By addressing the needs of unbanked populations, UPI can significantly contribute to global financial inclusion.
UPI’s growing influence
A recent Paysecure report highlights UPI’s emergence, surpassing global digital payment platforms like PayPal, China’s Alipay, and Brazil’s PIX in transaction volumes. Between April and July 2024, UPI processed a staggering Rs 81 lakh crore in transactions. This growing global adoption benefits Indian travellers by offering seamless payments abroad and enhancing remittance flows.
As the world’s leading recipient of remittances—over $125 billion in 2023—India’s push to internationalise UPI could reduce cross-border transaction costs, benefitting expatriates and the domestic economy alike.
Challenges to global leadership
Despite its potential, exporting UPI faces challenges. Developed markets like Japan have well-established financial systems, requiring India to demonstrate unique advantages. Strategic collaborations, coupled with policy support and infrastructure subsidies, will be crucial for overcoming these hurdles.
Another significant challenge is ensuring data protection and cybersecurity. With rising transaction volumes, maintaining user trust through robust safeguards for personal and financial information is paramount.
Promoting UPI as a case study in Indian training and management institutions could also enhance its global acceptance, offering valuable insights to international policymakers and businesses.
As NPCI explores partnerships to expand UPI’s reach, the groundwork is laid for a new era in global digital transactions. By addressing challenges and highlighting its unique strengths, UPI has the potential to become a global phenomenon, showcasing India’s technological leadership and bolstering its economic and diplomatic influence.