The UPI of 2016 and today are completely different: NPCI MD & CEO Asbe

The primary focus remains on growing UPI, which has 10X growth potential. Currently, 400 to 450 million users use it monthly, it has the potential to grow to over 1 billion, said Dilip Asbe, MD, NPCI

Unified Payments Interface (UPI) has grown exponentially over the past few years, with newer use cases being rolled out on the real-time payments system. Dilip Asbe, managing director and chief executive officer (CEO), National Payments Corporation of India (NPCI), in an interview with Ajinkya Kawale, speaks about the next phase of growth for the retail payments body, its annual surplus allocation, future considerations for subsidiaries, comments on a 30 per cent market cap, and opportunities to fund inorganic growth, and more. Edited excerpts:

 

What are some of the big bets that NPCI is focused on?

 

The primary focus remains on growing UPI, which has 10x growth potential. Currently, 400 to 450 million users use it monthly. It has the potential to grow to over 1 billion. Expanding users and merchants will require significant investment and new use cases from the ecosystem.

 

Second, we aim to expand access to formal credit in a collaborative and responsible way. There is an opportunity to expand the market significantly with the Credit Line on UPI under the guidance of the Reserve Bank of India (RBI) and government. UPI has created a large digital footprint. We need vehicles like Credit Line on UPI, which can be low-ticket, high-frequency credit unlike credit cards.

 

Third, on the tech side, we need to effectively use artificial intelligence (AI), blockchain, and digital currency. AI is used for real-time fraud risk assessments. We have been able to contain the reported fraud below one basis point (bps) of UPI value, which is reasonable.

 

Fourth, globalisation. Cross-border integration requires close cooperation between regulators. We have made early progress with UPI in seven countries, with merchant enablement underway, and four to five more countries exploring our tech stack.

 

How different is the next phase of growth for UPI?

 

Around 100 to 150 billion transactions a month is the true potential of UPI. Reaching the next 600 million users will require hand-holding and initial incentives until usage becomes habitual. To build trust and digital awareness, NPCI has been running extensive digital payment safety campaigns over the past year. UPI has not yet reached maturity, but realising its full potential will demand continuous innovation, investment, and collaboration from both banks and fintechs.

 

What is NPCI’s stance on the ongoing discussions around MDR?

 

I would not like to comment on this, since the matter is under discussion with the government and RBI.

 

NPCI has introduced payment methods like Lite and Lite X. Is that in anticipation of bank servers or processing hitting a peak anytime soon? We have seen three outages so far…

 

Lite and Lite X are the same product, but the way they have been designed ensures that we avoid multiple hops for a small-ticket transaction. Every UPI transaction takes about 10 hops to complete, and for small-ticket ones, there can be a better way.

 

Not really. Banks have been fairly committed. The RBI and the government monitor the performance of NPCI and banks on a regular basis. When you plan for 10x growth from where we are, we need to keep on innovating. The UPI of 2016 and today are completely different. It is an evolutionary process.

 

What caused the outage in UPI transactions on March 26?

 

On that day, NPCI experienced intermittent technical issues that impacted UPI transaction success rates for about an hour. The issue was identified and addressed, and the system has since stabilised. A thorough root cause analysis has been conducted, and corrective measures—including replacement of the affected hardware—have been implemented to prevent recurrence. We acknowledge the inconvenience caused to users and understand the business impact of such disruptions. We sincerely regret the disruption and remain committed to maintaining transparency, strengthening system safeguards, and ensuring seamless digital payment experiences for all users.

 

How can banks ramp up UPI volumes on their own apps?

 

Banks do have an interest. It is because they have been in various stages of technical or technology challenges and evolution to handle the scale. Some of the banks like SBI, ICICI, HDFC, and Axis—we see efforts from their side. Yes Bank has launched a new app on UPI now. There are efforts, but more and more efforts are required.

 

NPCI has a surplus of Rs 1,100 crore. How does NPCI allocate this?

 

Those are decisions taken by NPCI’s board. But we are designed as not-for-profit. The objective is how we can create resiliency and ensure that systems are always available, which needs huge investments in infrastructure. We have recently built two data centres at Hyderabad and Chennai. We have a third data centre and are looking at a fourth one. We need continuous investment from a risk management and overall technology infrastructure perspective.

 

Second, NPCI settles large values on a daily basis and we maintain the settlement guarantee fund and risk reserves.

 

We have offices in Hyderabad and Chennai, but in Mumbai we do not have our own office. As the scale increases, NPCI has always reduced the price of UPI transactions or NPCI fees almost every year to ensure economies of scale are passed back to the ecosystem.

 

Were more issuances of TPAPs in line with the 30 per cent market cap you wanted to implement by the end of 2024?

 

We have now extended the cap by two more years, and efforts are on to see how more players can play the game. I think having a balanced market share is an objective. It is a very difficult task in that sense. We are hoping new players are able to invest back, gain the market share, and grow the market. More importantly, bring out different use cases. It is possible, but I believe it is taking longer than we expected.

 

Also, the larger a player becomes, the size and legacy obviously start creeping in. Smaller players have an advantage to innovate more, create better features on top of UPI to target specific segments. I think two players are getting the advantage of network effects and I do not know how long it will last. We are seeing action on Cred, Navi, super.money, and Paytm. There are some indications that things will change in some time.

 

A record 20 firms in 2024 received approval from NPCI to operate UPI. Is it getting easier to get these licences?

 

A few things might be driving third-party application providers (TPAPs). MDR is zero and the government is giving some incentives. UPI acts like an infrastructure layer which has 450 million users, and somebody launching an insurance, investment, or credit app gets access to that user base. Customer acquisition costs come down dramatically. UPI is democratising user acquisition the way Aadhaar helped democratise KYC. More players will bring more competition. As of the January–March 2025 quarter, a few TPAPs have been granted licences to operate in UPI. We anticipate they will go live over the course of the year.

 

On BHIM being hived off. Was there a conflict of interest between NPCI and BHIM, since the latter also competes with other apps, and is owned by NPCI? Would NPCI look for a similar hive-off in future?

 

On more hive-offs, there are some considerations, but I cannot speak about them right now.

 

BHIM has been part of NPCI for seven to eight years. We do not see it as a competing force, but more of a collaboration. BHIM is seen as the country’s own app. The objective is not to grow 50 per cent or 100 per cent of UPI volumes but to ensure there is a sovereign alternative. We hived it off so that arm’s-length distance can be maintained between BHIM and NPCI.

 

The objective is to build up the tech architecture. Cashbacks offered on BHIM are fairly small, with the objective to build engagement. It is one of the apps, and customers have the choice of bank and third-party apps, in line with RBI’s objective of interoperability.

 

The other reason to hive it off is also because having a separate company provides focus and attention.

 

Would NPCI look at opportunities to create a fund, or for inorganic growth?

 

That is an idea we have been working on. We have a policy on acquiring software intellectual properties (IPs), which is in a nascent stage. We are keen now on open sourcing some of our own software. For example, we have open sourced a blockchain manageability software. We intend to open source some AI models in the future. It is more about contributing to the technology and developer community around NPCI using co-creation as a principle.

 

Approach to tackle frauds, since most of them are socially engineered?

 

It is a three-pronged approach. One, working with law enforcement agencies and the Ministry of External Affairs to tighten the legal framework and ensure deterrence for financial fraudsters. The country needs strong deterrence so that the offence is punishable.

 

Second is to continue education and awareness.

 

Third, use tech, artificial intelligence (AI), and machine learning (ML) in a big way to protect against fraud.

 

Do we need more third-party players, or can the existing ones serve the demand?

 

The banks and the fintechs are the core constituents of the UPI ecosystem. To drive new use cases and serve different needs, we would need new players. For example, we may want many players building multilingual payments. Today, when we look at WhatsApp’s large user base—which is the highest daily active user base in India—multilingual voice is the biggest use case. So, why not payments? We need quality players who would bring more innovation and create an impact to increase the inclusion that is necessary in the UPI ecosystem.

 

AI practice: use cases emerging at NPCI? Where does blockchain figure in?

 

We are using the Bhashini stack for conversational payments, some supervised learning frameworks for creating fraud models, graph techniques, among others. Central bank digital currency (CBDC) has been a primary use case for blockchain.

 

What use cases are you looking at globally with NPCI International? Any new geographies?

 

One is the global stack, second is cross-border payments, and third is cross-border remittance. Most of the announcements are aligned to the objectives that have been laid out by the RBI. A lot of work is happening in Africa and the global South.