UPI Revolutionizes Financial Inclusion in India

The Unified Payments Interface (UPI) has dramatically improved credit accessibility for underserved borrowers in India. Since its 2016 launch, UPI has facilitated the broader reach of digital transactions, with 75% of retail digital payments made via UPI by October 2023. The system supports innovation and equitable growth.

The Unified Payments Interface (UPI) is making waves in the realm of consumer credit, especially among underserved borrowers lacking prior credit history, a recent study reveals.

Since its debut in 2016, UPI has become a transformative force in financial access across India, enabling seamless digital transactions for 300 million individuals and 50 million merchants. By October 2023, UPI accounted for 75% of all retail digital payments, as highlighted in a study titled "Open Banking and Digital Payments: Implications for Credit Access."

Designed as an interoperable payment protocol, UPI allows third-party vendors to offer payments as a service across participating banks. It has opened new credit avenues for groups traditionally sidelined by formal financial systems. Leveraging transaction data, lenders can now make informed credit decisions, supporting the fastest growth among fintech lenders compared to traditional banks. The study underscores how digital technology's affordability has fueled UPI's adoption nationwide. Furthermore, robust UPI transaction data has facilitated responsible credit expansion without increasing default rates. The success of UPI in India could serve as an inspirational model for other nations, combining digital infrastructure with open banking policies to combat financial exclusion.

(With inputs from agencies.)