Growing Retail Digital Payments: The Value of Interoperability

This Note shows that interoperability can increase digital payment adoption by enhancing user choice. Evidence from India’s Unified Payments Interface supports this, highlighting interoperability as a key tool for reducing the use of cash.

Volume/Issue: Volume 2025 Issue 004

Publication date: June 2025

ISBN: 9798229014250

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Topics covered in this book

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Finance , Economics- Macroeconomics , Payments , Interoperability , UPI , Fintech , Networks , UPI transaction value overtime , closed-loop payment system , app transaction value , payment transaction , transaction volume , UPI system , Digital financial services , Payment systems , Public sector , Global

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Summary

Policymakers in many countries aim to increase the uptake of retail digital payment systems. This Note examines whether interoperability can help achieve this goal. We provide a conceptual framework that explains how interoperability can support the adoption of digital payments by increasing users’ freedom to choose their favorite app. We present evidence consistent with this framework using granular data covering the universe of transactions on India’s Unified Payments Interface (UPI), an interoperable platform that has become the world’s largest retail fast payment system by volume. We find that interoperability has indeed supported adoption, suggesting that promoting interoperability could be a promising policy lever for countries seeking to transition away from cash.