India

Asia Pacific

India’s IP infrastructure enables users to transfer funds and make payments instantly, using the Immediate Payment Service (IMPS) or the Unified Payments Interface (UPI) — both launched by the National Payments Corporation of India (NPCI).

IMPS was the first IP interbank electronic funds transfer system in India. It launched in 2010 and operates around the clock. Supported by 243 banks and payment service providers, IMPS enables fund transfers via various channels, including online and mobile banking, ATM, SMS, branch and USSD. Funds can be transferred using a recipient’s bank account number and the Indian Financial System Code (IFSC), or their mobile number and Mobile Banking ID (MMID).

UPI launched in April 2016 and is built over the IMPS infrastructure. UPI integrates multiple bank accounts into a single mobile app, allowing for 24/7/365 instant money transfers initiated via mobile. It is supported by over 140 banks and PSPs and offers additional benefits over IMPS, such as simplified P2P and merchant payments, using mobile numbers or QR codes, and faster payments authentication. Perhaps due to the incremental benefits and user experience enhancements it offers, UPI has seen extraordinary adoption in the market. In 2018, UPI transaction volumes surpassed those of IMPS and last year UPI processed more than five times the number of IMPS transactions.

Timeline

MARKET DEVELOPMENT

ACCEPTANCE
  • Consumers
  • Banks
  • Merchants
  • Billers

TOTAL PARTICIPANTS

>240

Population banking level

1.13

Number of debit, credit and charge cards per adult

46

Index to global average

U

Underbanked

Key statistics

2010

IP launch year

Immediate payments types

Single instance, donations, collections

Initiation & authorization

Bank account, email, QR code

ISO 8583

API-based standard
Message standard

Transactions

15.3b

2019

52.8b

2024f

28.2%

F5 Yr CAGR

84%

% of adults who have a mobile wallet and have used it in the past year

Share of volumes by payments instrument

Transactions

2019
2024

Spend (USD)

2019
2024
  • Paper-based payments
  • Electronic payments
  • Immediate payments

Immediate payments volume and its share in overall NON-PAPER-BASED transactions, 2014-24f

% of total electronic payments transaction volume

Insight

India is a prime example of the tremendous upside for IP growth and adoption within a historically underbanked market with heavy reliance on cash payments.

IP has gained significant traction since 2014, spurred on by the government’s payments modernization initiatives to provide financial inclusion to the unbanked, and empower digital payments transformation by moving to a less cash-reliant economy. One of the key regulations to bank the unbanked occurred in 2014, when the government issued unique biometric identification numbers to 99% of adults, enabling the opening of no minimum balance bank accounts. In 2016, the government demonetized 86% of the cash in circulation, compelling the shift to electronic payments and motivating citizens to open bank accounts. As a result, by 2017, 80% of Indian adults reported having a bank account, up from just 53% in 2014.

Mobile wallet usage has also grown significantly, with adoption among adults up nearly three times in the past five years. Mobile wallets now play an important part in the payments ecosystem, and with UPI integration in some of the most popular wallets, they are one factor in fueling IP growth in India.

The message for banks, merchants and billers is clear: those who are not currently offering IP are behind the adoption curve and should look to upgrade and reap the benefits of growing IP demand. Additionally, PSPs and other alternative payment providers should take advantage of IP growth by integrating UPI into their mobile wallet offerings.

ACI’s take

UPI has witnessed phenomenal growth in P2P transactions. One of the key factors in this “hockey stick” upward trajectory was India’s choice to implement a four-party model for IP. This model is usually seen in mature card markets, but India reimagined this status quo to enable access to UPI services for banks, processors, merchants and fintechs. The regulator clearly prioritized open participation across the digital ecosystem with its API standard, and this was key to increasing the development of seamless payment services leveraging UPI.

Interestingly, the regulator also decided to waive the merchant discount rate (MDR) for P2M transactions, and abolished the interchange and PSP fees. Thanks in part to the four-party model, 90% of UPI transactions are initiated on a non-banking fintech app such as Google Pay. This move may impact the revenue of fintechs as well as the banks, so these players must keep innovating to generate alternative revenue streams.

Meanwhile, WhatsApp is expected to do a full rollout of its UPI-enabled payment services in India, which will disrupt the entire UPI ecosystem in terms of P2P and P2M volumes.

Yet, as transaction volumes increase dramatically, so does the risk of fraud. Banks must educate consumers accordingly, while strengthening their own internal fraud and risk management platforms to continue capitalizing on this explosive growth.

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