A new paper published by the International Monetary Fund (IMF) on June 25, 2025, has praised the Unified Payments Interface (UPI) for revolutionising India’s digital payments landscape. The paper, titled “Growing Retail Digital Payments: The Value of Interoperability”, argues that UPI's interoperable framework, along with critical enablers like cheap mobile data, banking access, and digital identity systems, significantly contributed to its widespread success.

Authored by Alexander Copestake, Divya Kirti, and Maria Soledad Martinez Peria, the paper highlights that UPI’s design allows multiple payment apps to operate on a common infrastructure, giving users freedom of choice and enhancing user experience and trust.

UPI Success Built on More Than Just Demographics or Demonetisation

Earlier research had credited India’s digital payments growth to demographic changes and the 2016 demonetisation shock. However, the IMF authors argue that interoperability — the ability of different platforms to function within a shared system — is a core driver of sustainable adoption.

“UPI has transformed the digital payments landscape in India,” the IMF paper says, noting that its interoperable nature has enabled innovation, competition, and inclusivity in payments.

The paper adds that freedom to choose between apps leads to increased usage, as consumers are not tied to a single provider, encouraging better user interface design and service delivery.

Cheap Data, Digital IDs and Bank Accounts Crucial for UPI Success

The IMF researchers stressed that building infrastructure for an interoperable system like UPI is not enough. For such systems to succeed in other countries, there must also be key enabling investments, like:

• Affordable mobile internet

• Widespread bank account access (Jan Dhan Yojana)

• Reliable digital identity systems (such as Aadhaar)

These elements together created the foundation for India’s digital payment ecosystem, empowering both rural and urban populations to participate.

“Providing infrastructure for interoperable systems, or otherwise supporting interoperability through regulation, could be a promising avenue for countries seeking to transition from cash to digital payments,” the paper stated.

Global Lessons from India’s UPI Model

According to the IMF paper, India’s experience offers a blueprint for countries aiming to promote financial inclusion and reduce reliance on cash. However, the success is conditional on coordinated policy frameworks that ensure digital literacy, affordable connectivity, and accessible financial services.

India’s public digital infrastructure — including Aadhaar, UPI, and DigiLocker — has enabled government-to-person transfers, small merchant payments, and peer-to-peer transactions at scale.

Conclusion: UPI as a Global Model for Digital Transition

The IMF's endorsement of India’s digital payment journey reinforces UPI’s role as a global model for interoperable, inclusive, and affordable digital financial systems. As developing countries explore similar paths, India’s experience underscores the importance of combining technical innovation with grassroots financial infrastructure.

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