India built a single payment system that any bank or licensed app can use. A non-profit owned by the banks runs it. The central bank regulates it. Ten years on, it processes more than 100 billion transactions a year, and other countries are starting to use it.

The dilemma

In 2015, India had a strange combination of conditions. Hundreds of millions of people had bank accounts, but very few were paying digitally. The few who did had to use closed apps that only worked within one bank or one wallet. A customer with an HDFC Bank account could not easily send money to someone with a State Bank of India account through their phone. The Reserve Bank of India and the Ministry of Finance wanted to fix this without taking control of payments themselves, and without letting one private company become the dominant platform.

The regulatory gap

What India needed was a single payment standard with three features. It had to be open, so any bank or app could connect to it. It had to be cheap, so small shops and ordinary people could afford to use it. And it had to be supervised, so the central bank could oversee how money moved through it. No private company was going to build all three on its own. The card networks that already existed had no reason to be open. They made money from being closed.

The approach

In 2016, the National Payments Corporation of India, known as NPCI, launched the Unified Payments Interface, or UPI. NPCI is a non-profit jointly owned by India's banks and regulated by the Reserve Bank of India. UPI is built around a single technical standard. Any bank or licensed payment app can connect to it. Users do not send money to account numbers. They send it to a virtual address, like an email handle, which links to whichever bank account the user chooses. Most transactions are free for both the customer and the merchant. The reasoning was that an open standard, with every bank required to participate, would create more competition than any single private platform ever could.

Results achieved

UPI processed more than 100 billion transactions in 2023, with strong growth continuing since. The system has been connected internationally, with payment links to Singapore, the UAE, and several other countries. It now supports more than just person-to-person transfers. Customers can also access credit products through UPI. Apps like PhonePe, Google Pay, and Paytm compete fiercely on user experience, while all using the same underlying system.

Two limits are worth noting. UPI is structurally hard to make money from. The free-transaction policy that drove its rapid growth means there is little revenue to cover the costs of running and improving the system. That makes the apps and services built on UPI dependent on either advertising, cross-selling other products, or continued government support for the underlying system. The long-term sustainability of UPI depends on the Indian government continuing to invest in the basic infrastructure.

The transferable lesson

A public payment system that is open and supervised can produce more competition than either a state-run system or a fully private one. But the design choices matter. UPI works because it separated identity from account number. A user's virtual address is theirs, not their bank's, which means they can switch banks or apps without losing their payment identity. That is what makes the system genuinely open rather than open only on paper. Other countries copying the headline of "open payment standards" without that design choice tend to end up with systems that are technically interoperable but practically closed.