According to an International Monetary Fund (IMF) note, India now makes faster payments than any other country in the world, owing to the widespread adoption of unified payments interface (UPI)-based digital transactions.

Key Highlights

• India now processes the fastest digital payments globally, driven by massive UPI growth.
• UPI handles over 18 billion monthly transactions while usage of cash and cards declines. 

Since its inception in 2016, UPI has grown rapidly, while some proxies for cash usage have begun to decline. The note titled "Growing Retail Digital Payments: The Value of Interoperability" claims that UPI has overtaken other electronic retail payments in India and currently handles over 18 billion transactions monthly.

The Immediate Payment Service (IMPS) infrastructure serves as the foundation for UPI, an instant payment platform.

India's digital payment environment has changed as a result of UPI. According to the platform's data, interoperability can boost adoption while simultaneously enhancing users' experiences with digital payments.

"Interoperability directly increases users' freedom to select their preferred app, allowing them to fully benefit from the variety and quality of available apps. According to the IMF note, interoperability can also help new providers enter the market and encourage existing providers to upgrade their apps, resulting in indirect benefits for users.

As a result, interoperability can make digital payments more appealing to users, increasing overall adoption compared to a world with only closed-loop options.

Also Read: PhonePe and GPay Capture 82% UPI Share in June

According to the note, providing infrastructure for interoperable systems, or otherwise promoting interoperability through regulation, could be a promising path for countries looking to transition from cash to digital payments.

The National Payments Corporation of India (NPCI) launched the Bharat Interface for Money (BHIM) app in late 2016, when total UPI usage was low and there were fewer providers.

"In fact, prior to the launch of apps developed by major fintech firms, BHIM accounted for more than half of total payer-side transaction value. This emphasizes the potential catalytic role of direct public provision of payment apps," according to the IMF report.

The public sector can assist in overcoming coordination failures, such as low user adoption due to a lack of high-quality apps, and thus kick-starting an ecosystem, it added.

UPI volumes increased by 32% in June compared to last year. The transaction value increased by 20% compared to June last year. Daily UPI transactions increased to 613 million in June from 602 million in May.