India’s rapidly expanding Unified Payments Interface (UPI) is reshaping banking strategies, prompting financial institutions and fintech firms to seek new revenue streams as instant transfers become too cost-effective to monetise traditionally, according to a McKinsey report.
India’s booming Unified Payments Interface is forcing banks and fintech groups to rethink how they make money from payments, as instant transfers become too cheap to monetise in the old way. A new McKinsey Financial Services Practice report says UPI now processes more than 19 billion transactions a month and accounts for nearly a third of India’s total transaction volume, making the country one of the world’s largest instant-payment markets.
According to McKinsey, the very features that helped UPI scale are now squeezing traditional fee income. Zero charges for merchants and customers, public support and subsidies for lower-value transactions, and wide participation from banks and third-party apps have all helped drive adoption, but they have also made direct revenue harder to extract. The consultancy said banks, acquirers and payment schemes will need to shift towards lending, merchant services and other value-added products to stay competitive.
The report adds that India’s banks are already using UPI as a customer acquisition tool rather than a standalone profit centre. Many are competing by pairing instant payments with lending, merchant solutions and premium card products, while fintech companies are trying to turn their large user bases into broader businesses through loans, insurance distribution, merchant advertising and analytics. McKinsey also pointed to the Reserve Bank of India’s decision to allow RuPay credit cards on UPI as a sign that established players are adapting to instant payments instead of treating them purely as rivals.
The broader McKinsey research suggests this is part of a global shift. In its 2026 Global Banking Annual Review, the consultancy said fintechs are taking a growing share of banking revenues and are pushing into some of the most profitable areas, including payments, wealth management and lending. It also said markets that succeed with instant payments usually combine broad ecosystem participation, a clear benefit for users and merchants, and a steady stream of new features. In India, that evolution is now intersecting with policy, after Parliament passed the Taxation and Other Laws (Amendment) Bill, 2026, creating a framework for merchant discount rate charges on some UPI transactions, while the government says ordinary consumers and small merchants will remain exempt.
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