Unified Payments Interface (UPI) Growth and NPCI's Strategic Focus

The Unified Payments Interface (UPI) has seen remarkable growth, and the National Payments Corporation of India (NPCI) is targeting further expansion and innovation. NPCI's CEO, Dilip Asbe, outlines key areas of focus for future growth, addressing both domestic and international opportunities.

Key Areas of Focus for NPCI

• UPI Expansion:
  • Currently, UPI has 400 to 450 million monthly users, with the potential to exceed 1 billion users.
  • Significant investments are required to expand user and merchant bases and introduce new use cases.
• Formal Credit Access:
  • Expansion of credit access through initiatives like Credit Line on UPI.
  • Focus on low-ticket, high-frequency credit offerings.
• Technological Advancements:
  • Utilization of AI, blockchain, and digital currency for improved system efficiency and fraud reduction.
  • Fraud levels have been kept below one basis point of UPI value.
• Global Expansion:
  • Early progress with UPI in seven countries, with ongoing merchant enablement and exploration by more countries.

Challenges and Strategic Initiatives

• UPI Growth Potential:
  • Potential for 100 to 150 billion transactions per month, requiring sustained innovation and collaboration.
  • NPCI is actively running digital payment safety campaigns to build trust and awareness.
• Technical Challenges:
  • Technical issues leading to intermittent outages have been addressed with corrective measures.
  • Continuous investment in infrastructure to ensure system resiliency and availability is a priority.
• Market Dynamics:
  • Efforts to balance market share through the introduction of more players.
  • Potential benefits for smaller players to innovate and create targeted UPI features.

Infrastructure and Financial Management

• Surplus Allocation:
  • NPCI operates as a not-for-profit, investing in infrastructure and risk management.
  • Construction of new data centers to support increasing scale.
• Third-Party Application Providers (TPAPs):
  • Record number of TPAPs approved, driven by low MDR and government incentives.
  • Increased competition and democratized user acquisition.

Future Prospects

• BHIM App Hive-Off:
  • Maintaining an arm's-length distance to ensure a sovereign alternative.
  • Focus on collaboration rather than competition.
• Inorganic Growth and Open Source Initiatives:
  • Interest in acquiring software intellectual properties and open-sourcing technologies.
• Fraud Prevention:
  • Collaborating with law enforcement and using technology to combat financial fraud.

Global and Technological Developments

• International Expansion:
  • Focus on global stack, cross-border payments, and remittances.
  • Significant efforts in Africa and the global South.
• AI and Blockchain Applications:
  • Use of AI for conversational payments and fraud models.
  • Central Bank Digital Currency (CBDC) as a primary use case for blockchain technology.