India leads the world in fast payments thanks to UPI, says IMF

India has become the global leader in fast digital payments, driven largely by the rapid adoption of the Unified Payments Interface (UPI), according to a recent Fintech Note released by the International Monetary Fund (IMF).

UPI, an instant inter-bank payment system launched in 2016 by the National Payments Corporation of India (NPCI), now processes over 18 billion monthly transactions.

It has emerged as the country's most widely used electronic payment method.

It allows seamless transactions through mobile phones and supports real-time fund transfers across different banks.

The IMF’s note, titled "Growing Retail Digital Payments: The Value of Interoperability," highlights that the surge in UPI transactions has been accompanied by a noticeable decline in cash usage and the use of traditional payment instruments like debit and credit cards.

“India now makes faster payments than any other country. At the same time, proxies for cash usage have fallen,” the report noted.

Using detailed data from UPI transactions, the IMF emphasised how interoperability – the ability of different payment service providers to work together – has played a crucial role in expanding digital payments in India. The note cites UPI as the world’s largest retail fast payment system by volume.

The authors of the report, Alexander Copestake, Divya Kirti, and Maria Soledad Martinez Peria, also noted that measuring cash usage remains challenging due to its unrecorded nature, especially in the informal sector. However, they used ATM withdrawals as a reliable proxy and found that digital payment volumes have consistently increased relative to cash withdrawals, particularly in areas where interoperability expanded significantly.

“Total digital payments relative to cash withdrawals rise substantially and persistently more after integration in districts that face greater increases in de facto interoperability,” the note observed, reinforcing the idea that such platforms can successfully encourage a move away from cash.

The report advised that as platforms like UPI continue to grow, policymakers must remain vigilant against the emergence of monopolistic players that could threaten the system’s openness and competitiveness.

“Payment authorities should use a range of metrics to identify potential threats to this goal and tailor any responses to the specific underlying anti-competitive mechanism,” the authors warned, stressing the need for regulatory oversight to maintain a balanced ecosystem.

They also emphasised that system operators should actively engage with private sector stakeholders at every stage to ensure that infrastructure and policy decisions continue to support a healthy and inclusive digital payments environment.