NPCI Announces Major UPI Expansion in India with the Aim to Reduce Reliance on Cash

India is set to expand its Unified Payments Interface (UPI) by bringing millions more users onto the platform. The National Payments Corporation of India (NPCI) aims to add 200 to 300 million Indians, including children and household staff, who may not have traditional bank accounts. This initiative seeks to reduce reliance on cash, according to Dilip Asbe, NPCI's managing director and chief executive.

UPI has revolutionised payments for over 450 million consumers in the last five years. It allows users to pay for anything from holidays to tea using smartphones. Payments can be made by scanning merchant QR codes, with amounts ranging from small sums up to 500,000 rupees ($5,817), without transaction fees.

Global Expansion and Multilingual Features

India's UPI accounts for nearly 46% of global digital transactions, as per a PwC report. Retail digital payments have surged 90-fold in 12 years. Stakeholders like Prime Minister Narendra Modi's government, NPCI, and India's central bank are promoting UPI internationally. "The idea is to make remittances very affordable and real-time to all the diaspora," Asbe stated.

The NPCI is also enhancing UPI's multilingual and chat features to broaden access domestically. Vision recognition technology is being tested for parking payments. Additionally, the platform aims to expand its credit offerings for retail customers by leveraging customer repayment behaviour for credit approval decisions.

International Outreach and Remittance Potential

The Indian government has engaged embassies in promoting UPI abroad. The Reserve Bank of India (RBI) has approached several countries regarding the platform. In 2024, India's diaspora sent a record $129 billion back home, the highest ever recorded by any country in a single year, according to a World Bank report.

Besides remittances, UPI could facilitate money transfers for purposes like overseas education payments. While deals have been made with countries like Singapore and the UAE with significant Indian populations, progress with Western nations such as the UK, US, and Australia remains slow due to differing stages of real-time payment system development.

Transaction Fees and Merchant Discount Rate

A potential challenge for UPI's growth is whether users should pay transaction fees. Previously, an MDR of 30 basis points was charged but was waived in 2020 to boost adoption. To offset merchant costs, incentives were provided but dropped from 36 billion rupees in 2024 to 15 billion rupees in the following year.

Industry bodies advocate reinstating transaction fees; however, this could hinder UPI's growth. A LocalCircles survey found that 73% of respondents would stop using UPI if fees were imposed. The ecosystem is collaborating with the government and RBI on creating a small fee for large merchants to ensure platform viability.

The credit-as-a-service model is expected to evolve over three to five years. Asbe believes this will scale up lending opportunities through improved collections based on customer repayment patterns.