The Unified Payments Interface (UPI) has emerged as a transformative force in India’s financial ecosystem, bridging gaps in digital transactions and credit access. According to the study Open Banking and Digital Payments: Implications for Credit Access, UPI has empowered nearly 300 million individuals and 50 million merchants to transact seamlessly in the digital space.
By October last year, UPI accounted for an astounding 75% of all digital retail payments in India. This growth has particularly benefited underserved segments, such as subprime borrowers and individuals new to formal credit, granting them access to formal financial systems for the first time.
The study emphasized the pivotal role of affordable digital technology in driving UPI adoption across both urban and rural areas. “The accessibility and simplicity of UPI have made it a household name, breaking down barriers to financial inclusion,” the report highlighted.
Interestingly, while the surge in digital transactions led to an increase in credit access, there was no significant rise in default rates. This was attributed to the availability of robust UPI-enabled transaction data, which enabled lenders to expand credit responsibly.
The success of UPI underscores its potential to reshape the credit landscape, making financial systems more inclusive and sustainable.
