Digital Payments in India: Inside the Ecosystem and the Access Challenge

India has built one of the world’s most sophisticated payment ecosystems.

It’s also one of the hardest to access from the outside.

With 1.47 billion people, more than 2.6 billion bank accounts, around 500 million mobile money users, and its position as the world’s largest recipient of remittances, digital payments are embedded in everyday economic life. Indian workers abroad sent home a record US$135.4 billion in 2025, highlighting the scale of the country’s cross-border payment flows.

But reaching that infrastructure from abroad is a different challenge entirely, one shaped by regulatory complexity, local compliance requirements, and connectivity models that were built with domestic operators in mind.

For MTOs, PSPs, marketplaces and global platforms, India is too significant a corridor to approach without the right infrastructure in place. This article looks at how India’s payment ecosystem works, where international operators hit friction, and how Thunes is helping to build a scalable, compliant entry point to the market.

Table of contents

Inside India’s digital payment ecosystem

While many emerging markets relied on digital wallets to drive initial financial inclusion, India’s trajectory was distinct. Driven by a government-led account-first model, India effectively leapfrogged the wallet-based bankarisation phase common in other parts of the Global South.

Today, while wallets remain an important feature of the ecosystem, they operate within a framework anchored by mass bank account penetration and the Unified Payments Interface (UPI).

UPI as the backbone of digital payments

India’s real-time payment system, the Unified Payments Interface (UPI), sits at the centre of that shift. Processing around 85% of India’s retail payment volumes, UPI is the infrastructure layer that allows money to move instantly between bank accounts via a mobile device, connecting consumers, merchants, banks, and payment providers through a single, real-time network.

The UPI offers users a Virtual Payment Address (VPA), commonly known as a UPI ID, as a unique digital alias linking their bank account to India’s UPI network. It allows users to send and receive money instantly without ever needing to share sensitive account numbers or bank codes, as it is formatted similarly to an email address: username@bankname or mobilenumber@bankname.

The effect of UPI on payment expectations has been significant. Instant, low-friction transfers have become the baseline across consumer and business contexts, setting a standard that shapes how every other payment method in the market is evaluated.

India’s multi-rail ecosystem

UPI’s success didn’t eliminate other payment methods. Instead, it repositioned how they fit within the broader ecosystem.

This structure sets India apart from other markets where wallets were the primary solution for bankarisation; in India, the bank account is the foundation.

Banks continue to play a central role in account-based payments and settlement, while fintech platforms such as PhonePe, Paytm, and Amazon Pay have evolved from standalone wallet providers into broader payment and financial service ecosystems.

It has created a somewhat unusual result: a market where bank accounts, wallets, and real-time rails operate in parallel rather than in competition, each serving different use cases within a broadly interoperable system. 

Why wallets still matter

Despite UPI’s dominance and bank account penetration at around 90% of the population, some 30% of Indians used a mobile money account as their first formal financial account. Wallets remain the ‘sticky’ choice for micro-payouts, loyalty incentives, in-app environments such as ride-hailing, and low-friction refunds where immediate value is preferred over bank-to-bank settlement.

For businesses distributing incentives, creator earnings, promotional credits, or smaller-value payouts in India, wallets can provide a familiar and convenient way to deliver value without relying exclusively on traditional account-based payment flows.

That positions wallets as a complement to UPI and bank infrastructure, rather than a competitor, serving the payout and engagement use cases where speed and accessibility at the endpoint matter most. 

India’s influence is expanding beyond its borders

India’s payment infrastructure has been so successful that its model is now being exported, to influence cross-border payments beyond its domestic market.

Initiatives such as UPI-PayNow, which links India and Singapore’s payment systems, and Project Nexus, which aims to connect real-time payment networks across multiple countries, reflect a deliberate move toward government-led payment interoperability.

Fintechs and payment infrastructure providers are playing a critical role in making these connections commercially viable. Government-to-Government (G2G) rails create the framework, but private-sector operators are the ones who bridge it to businesses and consumers.

The broader implication is significant. As more markets build domestic real-time payment infrastructure, connecting different payment ecosystems becomes as strategically important as the capabilities of any individual rail. 

India is already ahead of that curve, and the international operators best positioned in the market will be those that understand how its infrastructure is evolving, not just how it works today.

The key hurdles for global platforms

India’s domestic payment ecosystem is built for speed, scale, and interoperability – inside India. For international payment providers, however, any attempts to access or expand into that ecosystem introduce a very complex set of operational challenges. 

The greatest friction frequently emerges in the last mile, where global payment flows must connect with local payment infrastructure, regulatory requirements, and consumer expectations.

Restricted external access

Most international businesses can’t just connect directly to local payment rails, wallets, or UPI infrastructure. Access requires specialised local connectivity, regulatory alignment, and support for India’s evolving compliance requirements.

This creates a disconnect between domestic accessibility and international accessibility. Payment experiences that appear seamless within India can require significantly more infrastructure, compliance coordination, and local market expertise when accessed from abroad.

Walled-off wallet connectivity

So rapid and successful has been the innovation around UPI, that wallets don’t represent the step-change in financial systems that they do even in many developed payment markets. 

Many Indian wallets remain closed or semi-closed to international inflows. Global platforms can’t assume that domestic wallet adoption automatically translates into straightforward cross-border connectivity.

As a consequence, for creator platforms, gig economy businesses, marketplaces, and remittance providers, specialised infrastructure is required to route funds into these domestic endpoints, if the demand is there.

Rigorous compliance and localisation requirements

A significant factor that has affected the use of wallets in India was the Paytm regulatory actions of 2024–2025, where one of India’s largest digital payment providers faced significant regulatory intervention. Since then, the Reserve Bank of India (RBI) has moved towards a higher-oversight model.

• The introduction of the Payment Aggregator-Cross Border (PA-CB) licence requires entities facilitating cross-border payments to meet more stringent net-worth, governance, and KYC requirements.
  
• The RBI’s Authentication Framework, effective from April 1, 2026, introduces a shift towards risk-based authentication models. Payment providers must support more sophisticated verification processes beyond traditional SMS-based authentication methods.

The key takeaway from these is that compliance can’t be a back-office consideration for any business looking to add payment capabilities to the Indian market. Any integration must be built on a foundation of regulatory alignment, robust KYC processes, and support for evolving authentication requirements. In India, access and compliance are increasingly interconnected parts of the same operational challenge.

The instant expectation

Real-time payment expectations shaped by UPI’s success are extending to cross-border payment experiences as well. Whether paying a freelancer in Bengaluru or a seller in Mumbai, 24/7 instancy is the market standard, and there is little tolerance for settlement delays or limited payment visibility.

The challenge for global payment providers becomes twofold: Building the connection to India’s payment ecosystem and doing so in a way that delivers the speed, transparency, and reliability that these users now expect, and into their preferred endpoint.

How Thunes facilitates the ‘bet on India’

Thunes provides access to India’s payment ecosystem through a single API connection to its Direct Global Network. 

Providers don’t need to manage separate local integrations, compliance frameworks, or liquidity positions for each payout type. The network handles that complexity, combining local infrastructure connectivity with the compliance and treasury infrastructure required to operate at scale in the market.

Payout connectivity

Through direct local infrastructure, Thunes supports:

• Bank account payouts across India, with real-time processing for C2C, B2C, and C2B flows
• B2B payment support on a T+1 basis
• Cash pick-up services for recipients who prefer physical collection

Compliance and regulatory alignment 

Fortress Compliance embeds AML controls, sanctions screening, and KYC processes directly into payment flows. 

As India’s regulatory framework continues to evolve, compliance obligations are handled at the network level rather than requiring providers to build and maintain separate frameworks for each requirement.

Treasury and FX management 

SmartX Treasury supports FX management, liquidity coordination, and settlement visibility across India’s corridors, giving treasury teams the operational control needed to manage high-volume inbound flows without expanding their liquidity footprint.

What this means for global businesses

India’s payment ecosystem creates different operational requirements depending on how money is moving into the market.

• MTOs and remittance providers. India is the world’s largest remittance recipient. Bank account deposits, cash pick-up, and real-time C2C processing support delivery into corridors from the UAE, US, Saudi Arabia, and UK, where recipient expectations are shaped by domestic real-time payment standards.
• PSPs, marketplaces, and platforms. India’s creator economy, gig workforce, and digital commerce sectors need payout infrastructure aligned with local preferences. A single framework covering bank accounts, wallets, and real-time rails reduces operational complexity as volumes grow.
• Global businesses and MNCs. T+1 B2B payment support, combined with FX and liquidity management, gives treasury teams the visibility needed to manage India as a high-value corridor rather than a high-complexity exception.

India is a market that rewards the right infrastructure

The opportunity in India is not in question. The corridors are active, the volumes are significant, and the payment infrastructure is among the most advanced in the world. What determines whether international operators can participate in that opportunity is whether their own infrastructure is built to match it.

Regulatory alignment, local connectivity, real-time execution, and compliance at the network level are not optional features in the Indian market, but the baseline requirements for operating at scale.

For MTOs, PSPs, banks, marketplaces, and global platforms, Thunes provides the infrastructure layer that connects cross-border payment flows to India’s domestic ecosystem via a single integration, with built-in compliance and treasury support.

Explore how Thunes supports compliant, scalable access to India’s payment ecosystem through the Direct Global Network.