India's digital payments ecosystem has grown remarkably, with the Unified Payment Interface (UPI) surpassing 750 million daily transactions. Dilip Asbe, CEO of the National Payments Corporation of India (NPCI), believes leveraging artificial intelligence (AI) is essential for reaching a target of over one billion daily transactions. In a recent conversation at Mumbai Tech Week, Asbe highlighted that collaboration between NPCI, the central bank, and the government will be crucial in this expansion.
Asbe emphasized AI's potential across various facets, particularly in acquiring new users, enhancing fraud detection, and improving credit accessibility for users and merchants with digital footprints. “We must use AI effectively to protect our current citizens, to find fraud, and to find mules. AI must also be used to provide credit to all the users and merchants who have digital footprints,” he said, underscoring the importance of incorporating voice and multilingual solutions to streamline the onboarding process.
Voice Technology and Its Potential
While discussions around voice interfaces as a communication tool in India have been prevalent, Asbe views the current execution as in its early stages. NPCI's introduction of a voice assistant in 2023 has faced slow adoption. However, he sees promise in voice technology, stating that its success hinges on developing more accurate models that fit specific use cases within the payment ecosystem.
AI Integration in Financial Regulations
In the global landscape, companies like Coinbase and Robinhood are incorporating AI into their finance platforms, prompting a competitive rush. The U.S. is exploring how AI can empower users with automated trading and personalized financial advice. NPCI has been piloting various AI-driven applications, including those focused on payments and agentic commerce. However, the broader implementation of these capabilities remains limited.
Asbe advocates for a measured approach to AI in finance, suggesting that strong regulations and frameworks must be established to protect users while mitigating risks. He believes that if something goes awry, systems should allow for traceable user consent in any interactions involving agents or automated systems.
Additionally, Asbe sees an opportunity for the Indian financial sector to develop localized language models. He remarked, “We believe that the models will differentiate from each other based on the datasets that are made available to them.” With a wealth of rich data, there is potential for Indian firms within the banking and fintech sectors to create specific, efficient small language models.
An example of NPCI's commitment to innovation is its launch of the FIMI model, designed to resolve user disputes. Asbe noted that the model already serves over a million users, aiding them in canceling mandates and addressing issues, highlighting its rapid scalability.
Competition in the UPI Sector
Despite NPCI's push for healthy competition among UPI applications, data reveals that Walmart-owned PhonePe and Google Pay dominate the market, holding over 80% of the share. A regulatory cap on market share at 30% is slated to take effect by December 31, 2026, unless further delays occur.
During the discussion, Asbe acknowledged the minimal switching costs for users and the widespread overlap in essential features across UPI apps. Both PhonePe and Google have invested heavily in enhancing their platforms. However, Asbe believes that new entrants with sustainable business models could soon emerge. “The moment we see the commercial model being available to the ecosystem, I believe newer players will start investing very heavily,” he stated.
NPCI also took steps to increase competition by spinning off the BHIM UPI app as a wholly-owned subsidiary in 2024, aimed at enhancing its competitiveness. Although BHIM’s transaction volume has increased, its market share remains around 1%. Asbe clarified that NPCI does not have a particular target market share for BHIM but aims to establish it as a secure alternative to competitors.
As India solidifies its position as a leading digital economy, global investors are increasingly focused on the evolving regulatory landscape as they seek opportunities in innovative fintech solutions poised to invigorate market competition.