The growth of India’s instant payment system UPI is undoubtedly impressive. PwC’s Indian payments handbook refers to 57% growth in transaction volume and 44% in transaction value in the last financial year and the system now accounts for over 80% of total retail digital payments in India – a figure expected to rise to 91% by 2029.
UPI’s ease and convenience of use have positioned it as a preferred choice for a plethora of everyday transactions, eroding the small value transactions stronghold traditionally held by cash and debit cards explains Abhay Prakash Singh, Research Analyst at Euromonitor International.
“Rising smartphone penetration and enhanced mobile internet connectivity is making it easier for Indian consumers to access and use UPI-based payment services that remain free from merchant discount rate charges,” he says.
One of the main challenges of sending remittances – especially peer-to-peer or cross-border payments – is the high cost involved. These include currency exchange costs, intermediary charges and regulatory costs. “The average cost of sending money across international borders can be up to 6.4% of the transaction amount,” says Guhaprasath Rajagopal, Head of India Payments at J.P. Morgan. “UPI can make a significant impact on transaction economics given the strong Indian diaspora and the country’s position as the largest market for inward remittances.”
Amit Baraskar, Vice President & Head of Treasury at Thomas Cook India outlines some of the benefits from a merchant perspective. “It is an almost zero cost payment mode for customers and easy to track for the receiver, which has made it one of the preferred modes of accepting payments,” he says. “It has become particularly popular as a means of paying for retail goods and services.”
Despite its rapid growth, Baraskar acknowledges that UPI still has significant untapped potential among female consumers in India. However, he still expects its use to grow rapidly over the next few years and refers to estimates of US$11trn worth of transactions by 2030. “We should see similar levels of growth across other parts of Asia from 2026,” he says. “This typically happens when neighbouring countries discover a tool that is simple, extremely cost effective and value adding. Once it becomes a success those sitting on the fence would have no option but to follow suit.”
Baraskar describes the UPI One World wallet – which was used for accepting payments from delegates at the G20 summit in New Delhi in September 2023 – as a potential game changer. “Credit cards on UPI are another major development,” he adds. “If a person can access credit and also pay by UPI, the combination becomes unbeatable presuming costs are reasonable and clearly understood by payers. This is an evolving area and should pick up some aggressive growth from next year.”
Users can already link their RuPay credit card to UPI apps for secure transactions without needing the physical card. One of UPI’s emerging applications is enabling Indian tourists to use their apps while travelling abroad, thanks to partnerships and cross-border integrations. “Indian tourists can simply scan QR codes at participating merchants in countries like Singapore, the UAE, Bhutan and Nepal, making payments as easily as they would back home,” says Pushpa Marwal, Analyst at Forrester. “This offers a seamless and convenient way to transact while avoiding the hassle of currency exchange or using international cards.”
There has been a significant increase in the availability of the UPI model across Asia observes Arun Kini, Managing Director Payments APAC at Finastra. “UPI has partnered with Liquid Group to make the payment option available across ten markets in Asia using the QR code model for merchant payments,” he says. “There is also a tie up with Singapore for cross-border remittances, with Malaysia and Thailand also likely to enable it.”
Expansion beyond its domestic market has always been a key objective for the National Payments Corporation of India (NPCI). Merchant payments via UPI are now live in Singapore, France, the UAE, Sri Lanka, Mauritius, Bhutan and Nepal and person-to-person remittances are supported via the UPI-PayNow link between India and Singapore.
NPCI International Payments (NIPL), the international arm of NPCI has partnered with the Bank of Namibia, the Central Bank of Peru and the Ministry of Digital Transformation of Trinidad and Tobago to assist them in developing UPI-like real-time payment systems. In June, NIPL signed an agreement with QNB to launch QR code-based UPI payments across Qatar.
Rajagopal notes that NIPL was incorporated in 2020 specifically for the deployment of RuPay and UPI outside of India and refers to the latest annual report from the Reserve Bank of India, which states that the central bank would work with NPCI to take UPI to 20 countries with initiation timeline of 2024-25 and completion timeline of 2028-29.
UPI is a key component of Viksit Bharat 2047, the Indian government’s vision to transform India into a developed nation by the 100th anniversary of its independence.
In a recent research briefing, Aditi Routh, an economist at the Federal Reserve Bank of Kansas City noted that there were 30 third-party application providers participating in UPI and that these apps were more popular than those offered by the major banks.
One of the factors behind this trend is that fintech payment service providers offer more comprehensive services to merchants (such as sales analysis and business management solutions). In some cases they provide consumers with credit lines on a UPI payment akin to BNPL.
Routh also observes that non-banks and fintechs are also enabling the expansion of UPI merchant payments beyond India. “Nonbanks and fintechs have played a critical role in the growth of UPI and will continue to be essential for its future development,” says Joe Jelinek, Research Director at Kapronasia. “Many of the most popular UPI apps – such as Google Pay, PhonePe, Amazon Pay and Paytm – are provided by nonbank entities. These platforms have driven UPI adoption by offering user friendly interfaces and additional features on top of the core UPI functionality developed by banks.”
PhonePe and Google Pay dominate the UPI ecosystem in India, with PhonePe holding a 49% market share and Google Pay 35%. “A large majority of person-to-person and person-to-merchant payments are routed through these fintechs rather than traditional bank apps,” says Jelinek. “Although UPI has its own app, BHIM, it has seen limited adoption compared to the fintech alternatives.”
Fintechs have also shaped the UPI landscape by integrating features like auto-debits and international payments, although regulatory challenges can impact their operations as seen with Paytm’s recent issues with the Reserve Bank of India regarding licensing and compliance.
Marwal agrees that nonbanks and fintechs have played a huge role in the development of UPI. “Companies like Google Pay, PhonePe and Paytm have not just helped popularise UPI among consumers – they have also created seamless, engaging user experiences that have boosted adoption,” he says. “Their ability to innovate on top of UPI’s infrastructure has completely transformed how people and businesses interact with digital payments in India.”
But this does not mean that nonbanks and fintechs will have an easy ride. According to PwC, new third-party application providers and the emergence of new use cases – such as UPI integration with credit cards and credit lines – are likely to increase processing demands on core systems. It recommends exploring the deployment of UPI infrastructure on cloud platforms for transaction processing.
Another notable challenge is the QR infrastructure required. “In India it is interoperable, but that is not the scenario in some of the countries outside India [that have been targeted for expansion of the service],” adds Rajagopal.
The big question moving forward is whether UPI could become a truly international system and take significant market share from more established rival operators.
“NPCI has already enabled UPI payments in a number of countries through pilot projects and partnerships,” says Jelinek. “However, transforming UPI into a global system will require overcoming significant challenges, such as aligning with the regulatory frameworks, technical standards and user preferences of different nations.”
There is also likely to be internal resistance in markets where there would be concerns that adopting UPI for domestic systems could give NPCI too much control over domestic payment networks. For this reason, while cross-border payments may see more integration with UPI, widespread adoption for domestic use (especially in developed economies) appears less likely.
“UPI is most likely to gain traction in South and Southeast Asian nations with economic or geopolitical ties to India,” says Jelinek. “These smaller countries, often more dependent on India, are already beginning to adopt the system. Larger nations and those with their own established instant payment systems, such as Pakistan, may be less inclined to adopt UPI domestically.”
Marwal describes NPCI’s international strategy as bold and realistic but agrees that it comes with a number of challenges. “UPI has been a tremendous success in India, largely due to its simplicity, real-time processing and cost-effectiveness,” he says. “The scale of adoption proves the system’s robustness and international interest is already growing, with countries like Singapore and the UAE integrating UPI for cross-border payments and NIPL working to expand its reach.”
“That said, scaling UPI globally will require addressing a few key issues. Regulatory alignment across different countries is essential since each market has its own payment infrastructure, security protocols and compliance requirements. NPCI will need to collaborate closely with central banks and regulators to ensure UPI complies with local standards while maintaining the features that make it unique.”
Each country operates under its own regulatory framework for payments, so aligning UPI with local laws, especially around data privacy and security, will be key. Moreover, UPI has to prove that it can coexist and complement the existing payment systems in these countries rather than directly competing with them.
Another challenge is competition. UPI will face established international players like Visa, Mastercard and various local payment solutions. NPCI will need to differentiate UPI, possibly by emphasising its lower transaction costs, faster settlement times and unique value propositions such as financial inclusion, which is something many countries are keen on. “Technologically, UPI’s scalability is a major strength,” adds Marwal. “It is built to handle high transaction volumes and its open architecture allows for seamless integration into different national payment systems. Additionally, with India’s growing influence globally through its digital public infrastructure initiatives, UPI’s international visibility is steadily increasing.”
David Armstrong, Managing Director of PayXpert (which in August 2022 became the UK’s first acquirer for UPI) says the company is developing its UPI solution to support both e-commerce and physical retail stores in the same way it supports Alipay+ and WeChat Pay. “I believe the National Payments Corporation of India’s ambition to make UPI a genuinely global system is a realistic aspiration in terms of transaction acceptance,” he says. “There are many schemes that have also focused on global acceptance for international travellers, although this does not mean that it will replace existing payment solutions, particularly in more mature payment markets.”
