New Delhi (ABC Live): India’s Unified Payments Interface (UPI) has emerged as the world’s largest real-time payment system, now accounting for nearly 49% of all global real-time transactions. This status, in fact, has been formally recognised by the International Monetary Fund (IMF) and further reinforced by the ACI Worldwide global payments benchmark.

However, this transformation did not happen by chance. On the contrary, UPI’s rise reflects a deliberate national strategy built on public digital infrastructure, zero-cost economics, rural-first deployment, and deep institutional coordination. Therefore, this explainer traces—step by step—how India converted UPI into the backbone of its digital economy.

Payments as Public Digital Infrastructure: India’s Foundational Choice

To begin with, India made a decisive policy shift. Instead of allowing private monopolies to dominate digital payments, the country deliberately treated payments as public digital infrastructure (DPI).

By contrast:

• The United States relies mainly on private card networks.

• China, meanwhile, depends on closed wallet ecosystems.

• Europe, on the other hand, remains fragmented across national banking systems.

India, however, chose a different path. It built UPI as a sovereign, interoperable, and not-for-profit national platform.

At the institutional level, the National Payments Corporation of India (NPCI) operates UPI under the supervision of the Reserve Bank of India (RBI). As a direct consequence:

• All banks connect on equal terms.

• All fintech apps operate on the same rails.

• No private monopoly controls transactions.

• India retains payment-level sovereignty.

In effect, therefore, UPI started life as a national infrastructure, not as a commercial wallet.

Zero-Cost Economics: The Real Engine of Mass Adoption

Equally important, India removed the single biggest barrier to digital payments—transaction cost. Under the UPI framework:

• Users pay zero fees.

• Merchants face near-zero MDR.

• Meanwhile, the government supports the system through BHIM-UPI incentive schemes.

As a result, even the smallest transaction remains economically viable. Consequently, adoption accelerated rapidly among:

• Street vendors

• Kirana stores

• Auto and cab drivers

• Micro-merchants

• Rural traders

In comparison, most global systems still impose usage costs. Therefore, UPI achieved what others could not—habitual daily usage at true national scale.

PIDF: Taking Digital Payments Deep into Rural India

Nevertheless, urban adoption alone could never deliver global dominance. Hence, the government created the Payments Infrastructure Development Fund (PIDF) to push digital payments into underserved regions.

Under this scheme:

• QR codes and POS terminals received targeted subsidies.

• Merchant onboarding devices reached remote markets.

• Most importantly, the deployment focused on Tier-3 to Tier-6 towns and rural India.

According to official data as of October 2025:

• 5.45 crore digital touchpoints have been deployed.

• 56.86 crore QR codes are now active.

• Around 6.5 crore merchants are covered nationwide.

As a result, small-town India now participates in a real-time digital transaction grid, which, in turn, places India far ahead of many developed economies in last-mile payment reach.

Mobile-First Design: Built for India’s Actual Users

At the same time, UPI adopted a mobile-first philosophy. Rather than assuming credit cards or expensive terminals, the system was built for:

• Low-cost smartphones

• Patchy mobile internet

• First-time digital users

• Local-language preferences

Accordingly, developers prioritised:

• QR-code payments

• One-tap authentication

• Instant bank-to-bank settlement

Because of this simplicity, UPI gradually became a daily behavioural habit, rather than a niche banking feature.

Bank–Fintech Cooperation by Design, Not Competition

Globally, banks and fintech firms often compete for system control. In contrast, India enforced structural cooperation:

• Banks provide accounts and settlement.

• Fintechs deliver consumer apps and innovation.

• NPCI runs the infrastructure.

• RBI safeguards systemic stability.

Consequently, Google Pay, PhonePe, Paytm, and Amazon Pay all ride on the same sovereign UPI rail. Thus, competition happens on user experience, not infrastructure dominance. As a result, fragmentation remains low, and scaling remains fast.

RuPay–UPI Integration: The Credit Revolution Inside QR Payments

Subsequently, the integration of RuPay credit cards into UPI QR payments reshaped retail finance. Today, users can:

• Pay via UPI using credit, not just bank balance.

• Access micro-credit at neighbourhood stores.

• Combine daily spending with short-term borrowing.

Therefore, India effectively collapsed the older divide between retail payments and consumer credit—a feat no other real-time system has achieved at this depth.

Full State Integration: When Payments Became Governance Infrastructure

Gradually, UPI moved beyond private transactions and into public services. At present, it integrates with:

• Railways and metro ticketing

• Toll plazas and fuel stations

• Municipal services and utilities

• Insurance, education, and e-commerce

Once government services adopted real-time settlement, private commerce followed naturally. Hence, UPI now operates as India’s digital governance backbone.

Moreover, this shift mirrors the rise of grassroots digital governance. ABC Live’s earlier analysis of the Meri Panchayat App shows how village-level administration now also rides on digital public infrastructure:
https://abclive.in/2025/07/22/meri-panchayat-app-review/

Interoperability: The Core Weapon Recognised by the IMF

From the IMF’s perspective, interoperability remains UPI’s defining advantage. Under this system:

• Any app can pay any bank.

• Any bank can receive from any app.

• Any merchant can accept from any user.

Because there are no brand silos or proprietary chokepoints, network effects grow exponentially. Consequently, UPI reached 129.3 billion annual transactions, according to ACI Worldwide and Ministry of Finance data.

The Global Numbers That Confirm UPI’s Supremacy

Thus, India now processes nearly half of all real-time payments worldwide, thereby shifting global digital finance gravity toward Asia.

Strategic Implications for India

Digital Monetary Sovereignty

Because UPI reduces dependence on foreign card networks, India strengthens control over its retail transaction arteries.

Global Fintech Power Shift

Meanwhile, countries across Africa, ASEAN, and the Middle East increasingly look to India’s model. Therefore, India is no longer just a user of fintech—it is now a global fintech architect.

Exportable Governance Technology

Finally, UPI represents not merely software, but a replicable governance model for the Global South.

Final Conclusion

In summary, UPI became the world’s largest real-time payment system not because of hype, but because India:

• Built payments as sovereign public infrastructure

• Adopted zero-cost economics

• Invested in rural-first acceptance infrastructure

• Forced banks and fintechs to cooperate

• Integrated credit, QR, and instant settlement

• Embedded the system deep into public governance

Taken together, these choices transformed UPI into a pillar of India’s national power—comparable, in strategic importance, to highways, ports, telecom networks, and even currency itself.