India’s UPI payment system is forging ahead

New Delhi: The UPI payments system, operated by the National Payments Corporation of India, is the world’s largest retail fast-payment system by transaction volume, according to an IMF report.

UPI has anchored a digital revolution in India, helping bring large sections of the population into a formal economy and becoming a backbone of a digital economy in which electronic payments are increasingly integral to everyday commerce, according to an article in the South China Morning Post.

According to government data, annual transaction volume surged to 241.62 billion in the financial year that ended in March 2026 from 17.8 million in 2016-17, while transaction value zoomed from Rs 7,000 crore to Rs 3.14 lakh crore over the same period.

Now, a decade after the government launched the Unified Payments Interface (UPI), India is asking some merchants to pay for the hugely popular system in order to ensure that the system is sustainable over the long run, as it costs banks to keep the service running.

The article points out that a predictable revenue stream would give banks and payment companies greater incentive to invest in cybersecurity, fraud detection and dispute resolution – as well as develop the next phase of the system, which would probably involve offering credit lines and expanding cross-border transfers.

"Several Asian and Global South systems have studied UPI precisely because it proved you can scale without surrendering the switch to Visa, Mastercard or a foreign boardroom," the article cites an expert as saying.

It also quotes Rohit Arora, co-founder and CEO of fintech firm Biz2Credit, as saying that some cost recovery from merchants was inevitable after so many years of free use.

The UPI network is now functioning across 11 countries, including Singapore, the United Arab Emirates, France, Mauritius, Nepal, Bhutan, Qatar, Sri Lanka, Cambodia, Greece, and Uzbekistan. Indian tourists, business travellers, and students can make direct person-to-merchant (P2M) payments from their Indian bank accounts, eliminating foreign exchange markup friction and reducing reliance on international cards or cash. The initiative advances digital public infrastructure cooperation.

The article also observes that other countries such as Indonesia have a rate structure for their systems, depending on merchant category and transaction size. Similarly, Malaysia’s DuitNow merchant charges depend on the bank or payment provider, with waivers available in some cases.

The underlying issue for other countries was the same as India’s because building and running a secure payment network cost money, the article added.

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