The internationalization of the unified payments interface (UPI) is rapidly progressing, showcasing India’s prowess as a leader in digital transformation, according to the latest report from the Reserve Bank of India (RBI). The numbers speak volumes: UPI achieved a staggering milestone of 16.6 billion transactions within just one month—October 2024. This impressive leap marks not only the growth of digital payments but also significant improvements, particularly with instant debit reversals soaring to 86%, up from 77% the previous year.
RBI Deputy Governor Michael Debabrata Patra emphasized the significance of UPI, describing it as “an open-ended system” capable of consolidative functionalities for multiple bank accounts through any participating mobile application. This system serves as the backbone for peer-to-peer and merchant transactions, facilitating seamless interactions across the banking spectrum.
The report outlines how innovations such as Account Aggregators and the Open Credit Enablement Network (OCEN), coupled with services on the Open Network for Digital Commerce (ONDC), have massively contributed to productivity improvements. ONDC, which had expanded its operations to over 720 cities, recorded orders nearing 50 million, reflecting its impactful outreach.
Addressing the substantial credit gap facing micro, small, and medium-sized enterprises (MSMEs)—estimated at around Rs 52.2 trillion—the Trade Receivables Discounting System (TReDS) has emerged as a valuable tool. This system connects these businesses with banks, optimizing the financing process and reducing funding costs by up to 2.5 percentage points. This is particularly significant, as the value of invoices financed through TReDS saw astronomical growth, soaring over 23 times.
With around 5,000 active fintech companies now involved, these firms are playing pivotal roles by providing various financial and technical solutions to MSMEs. These developments enable businesses to manage operations more effectively and improve supply chain financing.
The data shows substantial engagement from the Indian populace with digital services. Approximately 40% of the rural communities and 78% within the dynamic 20-30 age group are active internet users. One-third of households are now making online purchases for consumables and services, highlighting the growing consumer confidence and market adaptation to e-commerce. Notably, one-fourth engage with consumer durables, and about 10% purchase food online.
Embedded financing has also taken center stage, increasingly becoming influential within FinTech funding. This share has surged from just 2% in 2020 to 9% by October 2024, aligning with the trends of integrated financial solutions.
Considering these advancements, the RBI constructed a digitalization index using a dynamic factor model (DFM). Patra noted, “The index has been rising, reflecting the increasing pace of the digital revolution.” Research efforts are underway to assess the impacts of this digital transformation on the economy and the influence it has over monetary policy mechanisms.
India stands at the cusp of unprecedented growth and opportunities, particularly leveraging its extensive digital public infrastructure (DPI) and vibrant information technology (IT) sector. It also boasts one of the largest bases of artificial intelligence (AI) talent worldwide—a factor expected to fuel its continued progress.
Through rapid strides to internationalize UPI, India is not only reshaping its payment ecosystem but is also enhancing its position on the global digital stage, underscoring the country’s commitment to driving forward digital finance initiatives.
