India has raced to the top spot globally for fast payments, driven by the explosive growth of the Unified Payments Interface (UPI), while traditional payment methods like debit and credit cards are losing ground, according to a new report from the International Monetary Fund (IMF).
UPI Becomes World’s Largest Fast Payment System
In its fintech note titled Growing Retail Digital Payments: The Value of Interoperability, the IMF highlights that since UPI’s launch in 2016, digital payments have expanded rapidly, with indicators suggesting a decline in cash usage across the country.
“India now makes faster payments than any other country. At the same time, proxies for cash usage have fallen,” the IMF note stated, emphasizing UPI’s role as the world’s largest retail fast payment system by volume.
Currently, UPI processes over 18 billion transactions each month, overshadowing other electronic payment methods in India.
Interoperability Key to Digital Payment Growth
The IMF explained that interoperable systems like UPI provide a significant advantage over closed-loop systems, enabling seamless transactions between users of different payment service providers. This openness is fostering greater digital adoption nationwide.
“Total digital payments also rise relative to a proxy for cash usage,” the note observed, underlining how interoperability can encourage a shift away from cash transactions.
Decline in Cash Usage Measured by ATM Withdrawals
While measuring cash usage precisely remains challenging due to the anonymous nature of many transactions—especially in the informal sector—the IMF used ATM withdrawals as a practical proxy.
The analysis found that districts experiencing stronger increases in interoperability saw substantial and sustained growth in digital payments relative to cash withdrawals.
“This evidence suggests that interoperability can indeed support the adoption of digital payments and encourage a transition away from cash,” the note concluded.
Policymakers Urged to Guard Competition
The fintech note, prepared by IMF staffers Alexander Copestake, Divya Kirti, and Maria Soledad Martinez Peria, also urged Indian authorities to ensure the payment ecosystem remains open and competitive as UPI continues to grow.
“As the interoperable platform matures and more providers join, policymakers should watch for the emergence of dominant private providers and be prepared to take action to maintain a fully open, interoperable, and competitive system,” the authors advised.
They stressed that payment regulators should deploy diverse metrics to identify and counter potential anti-competitive practices. Furthermore, ongoing consultation between the system operator and private sector participants will be crucial to sustaining a healthy digital payments landscape, the note added.
