India Becomes World Leader in Fast Payments — Speed Beats All

According to an IMF statement, the rapid expansion of UPI has allowed India to surpass all other nations in terms of payment speed, while the use of traditional payment methods, such as credit and debit cards, is decreasing.

The NPCI created the Unified Payments Interface, a real-time and instantaneous payment system, to enable mobile phone interbank transactions.

According to the IMF's Fintech Note, "Growing Retail Digital Payments: The Value of Interoperability," UPI has expanded rapidly since its inception in 2016, while some stand-ins for cash usage have started to fall.

India Now Processes 18 Billion Transactions Per Month

"India currently pays more quickly than any other nation. Cash usage proxies have decreased concurrently," the note stated. Using granular data spanning the universe of transactions on India's UPI, an interoperable platform that has grown to become the largest retail quick payment system globally by volume, the note provides evidence in line with this methodology.

According to the fintech report, UPI has expanded rapidly since its 2016 inception, although other indicators of cash usage have started to fall. In India, UPI currently handles over 18 billion transactions monthly and is the most popular electronic retail payment method.

Fintech Notes provide policymakers with useful guidance on significant topics from IMF staff members. According to the report, interoperable payment systems like UPI offer an alternative to closed-loop systems and may encourage the use of digital payments. Users of various payment providers can make payments with ease thanks to these platforms.

Digital Payments Outrun Cash Withdrawals

The report went on to say that it is challenging to estimate cash usage since, particularly in the informal sector, cash transactions might take place anonymously and may not be documented in any ledger. "But we can estimate cash usage with the value of automated teller machine (ATM) withdrawals in each district," the note continued. "A very similar picture emerges when we compare the effect of integration on transaction values to cash withdrawals," it added.

According to the note, areas that experience higher rises in de facto interoperability see a significant and sustained increase in the total number of digital payments compared to cash withdrawals following integration.

According to this data, interoperability can help promote the shift away from cash and the use of digital payments. Maria Soledad Martinez Peria, Divya Kirti, and Alexander Copestake wrote the fintech note.

The authors added that regulators should keep an eye out for the rise of dominant private providers and be ready to intervene to preserve a completely open, interoperable, and competitive system as the interoperable platform develops and additional providers join.

According to the note, the system operator should ensure that its design decisions support the interoperable ecosystem's health at every stage of development by consulting with existing and prospective private sector partners.