UPI Drives Financial Access and Credit Growth, Study Reveals

A research paper by IIM and ISB professors highlights the transformative impact of the Unified Payments Interface (UPI) on financial inclusion in India. Since its launch in 2016, UPI has facilitated digital transactions for over 300 million individuals and 50 million merchants, accounting for 75% of retail digital payments by October 2023.

The study notes UPI’s role in enabling underserved groups, including new-to-credit and subprime borrowers, to access formal credit. Regions with high UPI adoption saw a 4% increase in loans to new borrowers and an 8% rise for subprime borrowers. Affordable internet access and the rise of fintech lenders, who outpaced traditional banks, have been pivotal in this growth, with the average fintech loan amounting to Rs. 27,778.