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UPI could become a cornerstone of India’s technological diplomacy and a powerful tool for expanding its imprint on the world stage
India’s Unified Payments Interface (UPI) has emerged as a game-changer in the digital payments landscape since its launch in 2016. Developed by the National Payments Corporation of India (NPCI), an entity of the Ministry of Electronics and Information Technology, UPI has rapidly integrated itself into the daily financial lives of millions of Indians, revolutionising how transactions are conducted. Our working shows that a 1 percent increase in UPI transaction volume strongly correlates (R2=0.75) with a 0.03 percent increase in GDP growth, highlighting UPI’s role in economic expansion. This article explores UPI’s exponential growth, its impact on India’s economy, the trust it has garnered among users, and its potential to position India as a global leader in fintech.
UPI’s growth is nothing short of extraordinary. From processing 0.8 billion transactions in January 2018 to over 14.4 billion in July 2024, UPI now handles nearly 80 percent of India’s digital payment. This massive adoption is due to UPI’s seamless integration with India’s existing banking infrastructure and the widespread use of mobile internet.
The key infrastructure components of UPI are:
Trust is the foundation upon which UPI’s success has been built. [6] Two key factors have contributed to the trust users place in UPI. Firstly, UPI’s endorsement by the Indian government as part of the Digital India initiative has lent it credibility and legitimacy. Wide adoption of Government-backed initiatives like the Pradhan Mantri Jan Dhan Yojana (PMJDY) are evidence of trust, integrating UPI and financial inclusion programmes.
UPI’s endorsement by the Indian government as part of the Digital India initiative has lent it credibility and legitimacy.
Secondly, UPI’s integration with Aadhaar provides a robust security framework, ensuring that transactions are secure and identities are reliably authenticated. Additionally, UPI offers real-time transaction updates and easy dispute resolution, fostering a transparent environment where users feel in control.
UPI’s impact on India’s economy is significant. [5],[7] It has not only streamlined financial transactions but has also been a critical driver of financial inclusion and GDP growth. UPI has played a crucial role in bringing over 300 million into the formal financial system. The number of new bank accounts opened under the Prime Minister’s Jan Dhan Yojana (PMJDY) initiative increased by ~50 percent between 2018 and 2024[3], which has been rapidly followed with the rise in UPI adoption.
We analysed the data of over 7 years since UPI was first introduced in 2016 to understand the UPI transactions volume and compared it with other instruments of financial transactions including cheque, credit cards and ATM transactions. We also compared it with the quarterly reported GDP data of India from Reserve bank of India (RBI 2023) and the Internet, Mobile and bank account volumes reported as per official quarterly statistics by Telecom Regulatory Authority of India (TRAI 2023). We tested key hypotheses using Regression analysis across datasets.
Microloan disbursements increased by 100 percent from 2018 to 2023, with a correlation between UPI transaction volume and microloan disbursements.
A regression analysis shows that a 1 percent increase in UPI transaction volume correlates with a 0.03 percent increase in GDP growth, highlighting UPI’s role in economic expansion[8][9]. The correlation is strong (R2-0.75) indicating that UPI adoption is a strong indicator of India’s GDP growth pattern over the last 7 years. UPI has also positively impacted credit accessibility, particularly in rural areas as well as among the urban poor. Microloan disbursements increased by 100 percent from 2018 to 2023, with a correlation between UPI transaction volume and microloan disbursements[9].
India’s ambition to export UPI to other countries represents a strategic move to enhance its positioning as a trusted development partner, particularly in digital finance. The success of UPI domestically has sparked interest from several countries, say, Japan, UAE, France and now Maldives, as part of their pursuit for financial modernization. By promoting UPI globally, India is engaging in technological diplomacy. Successfully implementing UPI in other markets could establish India as a leader in providing scalable and secure digital payment solutions.
UPI’s success could symbolise India’s pursuit to be a reliable partner in innovation, creating new opportunities for economic partnerships.
The global proliferation of UPI would not only highlight India’s technological capabilities but also enhance its cultural and economic influence. UPI’s success could symbolise India’s pursuit to be a reliable partner in innovation, creating new opportunities for economic partnerships. A promising example is the visit of External Affairs Minister, Dr. Jaishankar, to Male on 9 August 2024 and the warm welcome afforded to him by the President, Md. Muizzu [10]. Subsequently on 10 August 2024, India and Maldives signed an agreement to introduce the Unified Payments Interface in the archipelago nation.
Despite its successes, UPI faces several challenges that need to be addressed for its continued growth. Despite the potential, exporting UPI is not without challenges. Developed markets like Japan, where established financial systems already exist, present significant barriers to adoption. Strategic collaborations and policy support will be necessary to overcome these obstacles. These could include direct subsidisation of technology infrastructure by India.
UPI is more than just a payment platform; it is a testament to India’s capacity for innovation and its potential to lead in the global digital economy. While challenges remain, particularly around data privacy and global exportability, UPI’s success story is far from its true form. As India explores the potential to extend UPI’s reach beyond its borders, this platform could become a cornerstone of India’s technological diplomacy and a powerful tool for expanding its imprint on the world stage.
UPI is more than just a payment platform; it is a testament to India’s capacity for innovation and its potential to lead in the global digital economy.
For the world to accept UPI, a key challenge before India’s policy makers is to teach it as a case study in Indian training establishments and management institutions.
Rohit Bansal is an ORF Distinguished Fellow.
Kanti Mohan Saini is an Executive Fellow in Management Candidate at Indian School of Business, Hyderabad
Amrit Kumar Jha is an Executive Fellow in Management Candidate at Indian School of Business, Hyderabad
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Rohit is an alum of Harvard Business School and St Stephen’s College. He is a British Chevening scholar and has undertaken short professional programmes at ...
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Kanti Mohan Saini is a doctoral candidate at the Indian School of Business (ISB) Hyderabad. His research interests are in the areas of private equity, ...
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Amrit Kumar Jha is a doctoral candidate at the Indian School of Business. He works at the intersection of innovation and industry, particularly for resource-constrained ...
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