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India’s booming digital payment system faces a stress test. Frequent UPI outages call for backup systems, transparency, and economic sustainability.
Image Source: Getty
The Unified Payments Interface (UPI) suffered significant outages in the past few months, disrupting millions of transactions and resulting in several hours of inconvenience for users across the country. The National Payments Corporation of India (NPCI) acknowledged ‘intermittent technical issues’ causing partial transaction declines and resolved the issue promptly. The recurrence of multiple outages in recent months has raised concerns, particularly given that the UPI handles over 16 billion transactions monthly. These disruptions highlight underlying systemic vulnerabilities and underscore the need for practical reforms to strengthen the resilience of India’s digital payments infrastructure.
UPI has been a major catalyst in the success of the Digital India initiative, which aims to create a digitally empowered society. However, its continued success hinges not just on technological capability but on the public trust that users place in the system's reliability and security. Trust serves as the cornerstone for the adoption and sustained use of digital payments. Therefore, for Digital India to achieve its goals, maintaining and enhancing public trust is not merely a supplementary aspect but a fundamental requirement.
Repeated outages such as the April 2025 outages are likely to increase scrutiny on UPI’s infrastructure and its ability to scale reliably.
India’s financial landscape has been significantly transformed by UPI, enabling a shift from a predominantly cash-based economy to one led by digital transactions. Enabled by the proliferation of smartphones and supportive policy measures, UPI has played a central role in advancing financial inclusion and digital payment adoption. According to a PwC report, India now accounts for approximately 46 percent of global digital transactions—reflecting a 90-fold increase in retail digital payments over the past 12 years—underscoring the scale and impact of this transition. Monthly UPI transaction volumes have grown exponentially, crossing 14 billion per month in 2024. By March 2025, these numbers reached 18.3 billion. However, April 2025 saw a slight dip to 17.89 billion, which can be attributed to the frequent nature of outages.
The figure below illustrates UPI’s recurring service disruptions between January 2022 and May 2025.
Figure 1: Chronological timeline of Major UPI Outages between 2022 - 2025, Highlighting Systemic Vulnerabilities
Source: Author’s own from data available at https://www.npci.org.in/what-we-do/upi/uptime-upi-month-wise
Notably, NPCI’s uptime dashboard has not been updated beyond March 2025, leaving a data gap during a period marked by significant service disruptions. These outages are occurring at a time when digital payments have become an integral part of India’s economy. A few weeks ago, the Indian government announced an INR 1,500 crore incentive scheme to encourage small vendors to adopt UPI through the BHIM app. As more people and businesses shift to cashless payments, each minute of UPI downtime has a real impact.
These incidents have exposed a glaring issue, primarily the absence of instant backup options within India’s core Digital Payment System. While UPI is the most widely used digital payment system, the disruptions highlighted the risks of over-reliance on a single rail for day-to-day transactions. While alternatives such as card networks or Immediate Payment Service (IMPS)/net banking exist, they are either not as universally acceptable, especially among small merchants who lack Point of Sale (POS) machines or not as instantaneous and user-friendly as UPI.
During the UPI outages of April and May 2025, users had little choice but to wait for services to recover, underscoring the need for more resilient alternatives. Though cash is always available as an option, many customers today avoid handling cash and prefer the speed and ease of digital payments.
This lack of transparency raises concerns about systemic accountability and incident response, prompting users to question the efficacy and resilience of the system.
To its credit, NPCI has built some backup into the system. For instance, UPI Lite—which allows users to make small payments without internet access—uses nearby device-to-device (NFC) communication. It can prove useful during short network outages, but it does have limits, as it only works for small amounts and is not widely used. According to the founder of a major UPI app, customers still prefer a direct bank account solution, despite promoting UPI Lite as an alternative means.
Other solutions, such as UPI123Pay and Unstructured Supplementary Service Data (USSD) based banking services, were introduced by NPCI as backups in case of low connectivity or lack of smartphones. However, their practical implementation has been a hassle due to a lack of awareness amongst users, user experience issues, limited bank support, telecom integration challenges, and cost-related barriers. While there have been efforts to develop backup systems, their current form has not inspired enough trust or ease of use.
The NPCI—a non-profit entity under the Reserve Bank of India’s oversight serves as the backbone of India’s payment system, UPI. Its design and function are critical to India’s digital economy, processing billions of real-time transactions monthly.
Its model relies on a collaborative approach where banks, apps, and regulators collaborate to facilitate digital transactions. This layered responsibility structure makes UPI a shared infrastructure, where resilience depends not only on NPCI’s technical systems but also on the robustness and discipline of participating banks and third-party providers.
The 12 April 2025 outage is considered UPI’s longest disruption by the payment operator in recent memory. NPCI attributed its cause to an unexpected surge in ‘Check Transaction Status’ Application Programming Interface (API) calls, which exposed the vulnerabilities within this distributed model. Though NPCI acted swiftly by issuing updated integration guidelines and encouraging improved API management, the episode serves as a reminder that system-wide resilience requires continuous vigilance and coordination across all participants.
While the April 2025 outage has been attributed to a known cause with a defined resolution, the NPCI has not publicly disclosed the causes of other outages that occurred in March, April, and May 2025. This lack of transparency raises concerns about systemic accountability and incident response, prompting users to question the efficacy and resilience of the system. Without clear communication about the cause of a disruption or the steps being taken to address it, user confidence in the system can gradually decline. As several experts have pointed out, public confidence in UPI depends not only on uptime but also on how openly and responsibly NPCI and its partners communicate when things go wrong.
Safeguarding public trust in UPI and India’s broader digital public infrastructure will ultimately require more than mere technical fixtures. It will demand economic sustainability.
Although the recent outages raise concerns about systemic reliability, it is important to note that UPI is not the only digital payment system in India, nor is it uniquely susceptible to technical failures. Other payment channels including the Immediate Payment Service (IMPS), National Electronic Funds Transfer (NEFT), Real-Time Gross Settlement (RTGS), and Aadhaar Enabled Payment System (AePS) have all faced intermittent service disruptions in the past.
The challenge here lies in adapting system design to match the growing transaction volume and diversity of usage. NPCI’s ongoing efforts to scale UPI Lite, develop offline transaction options such as USSD, and enforce best practices among partner institutions all point to a proactive approach to infrastructure governance.
In light of these recent events, the New Umbrella Entity (NUE) framework is under a renewed spotlight. The NUE Scheme was a regulatory initiative proposed by the Reserve Bank of India (RBI) in 2019 to establish entities that would operate retail payment systems parallel to NPCI to do away with the concentration risks NPCI created by being the single digital payments operator in India. The central bank began inviting applications from entities that wanted to set up NUEs in 2020. However, the process halted the following year despite multiple entities submitting proposals. Although the RBI has not entirely closed the door on NUE, it could be worthwhile to review this framework as a means of enhancing systemic stability and promoting healthy competition.
As more people and businesses shift to cashless payments, repeated outages such as the April 2025 outages are likely to increase scrutiny on UPI’s infrastructure and its ability to scale reliably.
One of the key challenges today is that UPI operates on a zero-merchant-discount-rate (zero-MDR) regime. While this has accelerated adoption, it has also limited the commercial viability for payment service providers, banks, and fintechs that support and secure the system around the clock. This could adversely impact the users by making them increasingly dependent on a system whose upkeep and innovation may be compromised due to limited commercial incentives.
A nominal transaction fee or a tiered MDR structure would allow ecosystem players to invest in better backups and improved customer support.
Reconsidering this model, even modestly, could be a pragmatic step. A nominal transaction fee or a tiered MDR structure would allow ecosystem players to invest in better backups and improved customer support. Currently, many of these responsibilities fall disproportionately on NPCI and its partners without adequate compensation. The introduction of sustainable revenue flows would help distribute this burden more evenly and incentivise all stakeholders to maintain high uptime and performance standards.
UPI has proven its popularity and potential for inclusion; now it must prove its reliability. Incorporating lessons from global peers and addressing the single-point vulnerability will be key. By fostering competition through measures such as NUE or diversity of providers and enforcing contingency planning, such as mandated backups and offline modes, India can ensure that its digital payments backbone remains strong under pressure.
Safeguarding public trust in UPI and India’s broader digital public infrastructure will ultimately require more than mere technical fixtures. It will demand economic sustainability. A well-calibrated fee model can form the backbone of this effort—ensuring that those maintaining the system are adequately equipped, motivated, and rewarded.
Tanusha Tyagi is a Research Assistant with the Centre for Digital Societies, Observer Research Foundation.
The views expressed above belong to the author(s). ORF research and analyses now available on Telegram! Click here to access our curated content — blogs, longforms and interviews.
Tanusha Tyagi is a research assistant with the Centre for Digital Societies at ORF. Her research focuses on issues of emerging technologies, data protection and ...
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