New Delhi: Since its introduction in 2016, the Unified Payments Interface (UPI) has revolutionized digital payments in India, fostering financial inclusion and credit accessibility across diverse demographics. According to a research paper by professors from IIM and ISB, UPI enabled over 300 million individuals and 50 million merchants to perform digital transactions, accounting for 75% of all retail digital payments in India as of October last year.
The study underscores UPI’s significant role in empowering underserved groups, including subprime and new-to-credit borrowers. In regions with high UPI adoption, loans to these groups rose by 8% and 4%, respectively. The average fintech loan size was reported at ₹27,778, nearly seven times the average rural monthly expenditure, highlighting the scale of its impact.
Affordable internet access across India has been instrumental in UPI’s widespread adoption, bridging financial gaps in both rural and urban areas. The paper reveals that a 10% increase in UPI transactions resulted in a 7% rise in credit availability, as digital transaction histories enabled lenders to assess borrower profiles more effectively.
Fintech lenders significantly outpaced traditional banks in catering to smaller and underserved borrowers, scaling their loan volumes 77 times between 2015 and 2019. Despite this rapid credit growth, default rates remained stable, demonstrating that UPI-facilitated financial data promoted responsible lending practices.
The authors believe UPI’s success carries global implications, positioning India to lead in sharing this transformative technology with other nations, potentially reshaping global financial systems. This innovation stands as a testament to the power of affordable digital infrastructure in driving economic empowerment and financial inclusion.
