India Aims to Onboard 300 Million New Users to UPI Payments Platform

India is working to onboard hundreds of millions of new users to its real-time payment system, the Unified Payments Interface (UPI), while also promoting its adoption internationally.

UPI payments earlier carried an MDR of 30 basis points, but the government waived the fee in 2020 to accelerate the platform’s adoption

According to Dilip Asbe, Managing Director and CEO of the National Payments Corporation of India (NPCI), the goal is to bring an additional 200 to 300 million Indians onto UPI by helping them move away from cash dependency. This effort includes innovative initiatives such as delegated accounts for children and household staff who may not have access to conventional banking services.

Over the past five years, this domestically developed platform has revolutionized digital payments for more than 450 million retail users across the country. Using their smartphones, consumers can scan merchant QR codes and make seamless payments — from small everyday purchases to transactions of up to 500,000 rupees (approximately $5,817) — directly from their bank accounts, and so far, without incurring transaction fees.

India now contributes nearly 46% of the world’s digital transactions, driven by the immense popularity of UPI and a 90-fold surge in retail digital payments over the past 12 years, according to a PwC report. Building on this success, key stakeholders—including Prime Minister Narendra Modi’s government, the NPCI, and the Reserve Bank of India—are now aiming to promote the platform on a global stage.

“The idea is to make remittances very affordable and real-time to all the diaspora,” Asbe said.

Expanding Globally

Asbe mentioned that NPCI is focusing domestically, including on delegated accounts, to enhance UPI’s multilingual and conversational chat features in order to increase accessibility. The organization is also testing vision recognition technology to promote greater UPI usage in parking payments.

Additionally, NPCI is exploring opportunities to expand its credit offerings for retail customers. While UPI currently provides small-ticket loans, Asbe believes its infrastructure can enable lenders to make credit approval decisions based on customer repayment patterns, while also streamlining collections.

“The credit-as-a-service model will also evolve and get some scale in the next three to five years,” Asbe said.

According to Asbe, the Indian government has enlisted its embassies abroad to promote the UPI platform, while the RBI has been engaging with multiple countries to expand its global reach.

In 2024, India received a record-breaking $129 billion in remittances from its diaspora — the highest amount any country has ever received in a single year, as per a World Bank report.

Asbe noted that beyond remittances, UPI also has the potential to facilitate outbound payments, such as those made by Indians for overseas education.

India has finalized agreements with countries that have a significant Indian population, including Singapore and the United Arab Emirates. However, progress with Western nations like the UK, US, and Australia remains limited.

“It might take time because other countries are at a different stage of real-time payments system stabilization,” Asbe added.

Transaction Charges

Despite the rapid growth of UPI transactions, a challenge is emerging around whether users should incur a fee for digital payments. Central to this debate is the Merchant Discount Rate (MDR)—a fee charged by banks to merchants for processing transactions at the point of sale.

Previously, UPI transactions included an MDR of 30 basis points, but in 2020, the government waived this fee to encourage the platform's adoption. To offset merchant costs, incentives were introduced, but these incentives significantly dropped from 36 billion rupees in 2024 to 15 billion rupees in the subsequent year. Industry organizations are now advocating for the reintroduction of transaction fees.

Implementing such fees could hinder UPI's growth. A recent survey by LocalCircles, which polled 32,000 people, found that 73% of UPI users would stop using the service if a transaction fee were applied.

The UPI ecosystem is working with the government and RBI to make the platform viable “by creating a small fee for the large merchants,” Asbe said.

(This Article was originally published by Business Standard)