Mumbai: India has emerged as the global leader in faster digital payments, largely due to the widespread adoption and success of its Unified Payments Interface (UPI) system, according to a recent note from the International Monetary Fund (IMF).

Since its introduction in 2016, UPI has experienced rapid growth, becoming the dominant electronic retail payment method in India. The IMF's note, titled 'Growing Retail Digital Payments: The Value of Interoperability,' highlights that UPI now processes over 18 billion transactions every month, a figure that continues to climb. This surge in digital transactions has also coincided with a noticeable decline in the use of physical cash.

Built upon the Immediate Payment Service (IMPS) infrastructure, UPI's interoperability has been a key factor in its success. The IMF emphasises that this feature significantly enhances the user experience by allowing individuals to freely choose their preferred payment application while still transacting seamlessly with others, regardless of their app choice. This freedom fosters competition among providers, encouraging them to innovate and improve their services, which ultimately benefits users and drives broader adoption of digital payments compared to closed-loop systems.

The IMF suggests that supporting interoperable payment systems through infrastructure or regulation could be a highly effective strategy for other countries aiming to shift from cash to digital payments. The note also credits the National Payments Corporation of India (NPCI) for launching the Bharat Interface for Money (BHIM) app in 2016. BHIM played a crucial "catalytic role" in kick-starting the UPI ecosystem, accounting for a major portion of early transaction values before major fintech firms joined in. This demonstrates how public sector involvement can overcome initial adoption hurdles and foster a thriving digital payment environment.

Recent data further underscores UPI's impressive growth: transaction volumes in June 2025 increased by 32 per cent year-on-year, while the transaction value rose by 20 per cent compared to June last year. The number of daily UPI transactions also saw a slight increase, reaching 613 million in June from 602 million in May.

With inputs from IANS