India now makes faster payments than any other country with the quick growth of UPI, and the usage of other instruments, including debit and credit cards, is on the decline, according to an IMF note.
Unified Payments Interface is an instant and real-time payment system developed by NPCI to facilitate inter-bank transactions through mobile phones.
IMF's Fintech Note titled 'Growing Retail Digital Payments: The Value of Interoperability' said that since its launch in 2016, UPI has grown quickly, while some proxies for cash usage have begun to decline.
UPI now processes more than 18 billion transactions per month and dominates other electronic retail payments in India.
"India now makes faster payments than any other country. At the same time, proxies for cash usage have fallen," the note said.
The note presents evidence consistent with this framework using granular data covering the universe of transactions on India’s UPI, an interoperable platform that has become the world's largest retail fast payment system by volume.
"Since its launch in 2016, UPI has grown quickly, while some proxies for cash usage have begun to decline. UPI now processes more than 18 billion transactions per month and dominates other electronic retail payments in India," the fintech note said.
Fintech Notes offer practical advice from IMF staff members to policymakers on important issues.
It said that interoperable payment systems, such as UPI, are alternatives to closed-loop systems that could also foster the adoption of digital payments. Such systems allow for seamless payments between users of different payment providers.
"Importantly, total digital payments also rise relative to a proxy for cash usage," it said.
The note further said that estimating cash usage is difficult because cash transactions can occur anonymously and may not be recorded in any ledger, especially in the informal sector.
Inputs from PTI
