The role of UPI (Unified Payments Interface) in Financial Interoperability in India

Unified Payments Interface (UPI) is a communication protocol interface that connects multiple banks accounts to one mobile payment gateway. Interoperability of this interface –a feature which was enabled recently has made these connection even more flexible, as this interface enabled with interoperability feature can connect to any bank to a mobile payment gateway making payment seamless through a single unified QR code which is unique to each retail merchant. Impacting the payment time and access to payment gateways. The National Payments Corporation of India (NPCI) introduced UPI as a payment interface for the Indian market during 2016 to enable instant digital fund transfers among customers banking systems and secured payment. A total of 350 million active UPI users have been accounted who have generated payments for a value of 245 billion dollars as per the NPCI report of 2025. In this study the role of UPI's in financial interoperability and its advantages are explored by explaining the essential capabilities and operational capabilities of UPI in India. NPCI UPI usage data shows that the retailmerchant users and end-users usage rate is at 81.8% of the all modes of payment. This study uses quantitative research approach to study the usage rate of UPI. The study results shows that UPI is one of the popularly used mode of digital payment proving that the digital empowerment alongside trustworthy infrastructure has increased trust in the system. Studying the NPCI transaction data and transaction data collected from 79 retail merchants shows that insights of merchants getting the advantage of interoperability due which they can have a unified QR code and link of any nationalised or private bank accounts. Factors that influences more merchants to use the UPI mode of payment indicates interoperability as an advantage.