AI-Powered Digital Payments in India: A New Era Dawns

The National Payments Corporation of India (NPCI) is at the forefront of a digital payment revolution in India, with AI set to play a key role in its next phase.

India's digital payment landscape has witnessed rapid growth in recent years, with the Unified Payment Interface (UPI) surpassing 750 million daily transactions. The NPCI, which oversees UPI, aims to reach over a billion daily transactions, and its managing director and CEO, Dilip Asbe, believes AI will be crucial in achieving this goal.

"AI will be used very effectively when we look at the next wave of UPI, and that includes all aspects, including reaching new users. 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," Asbe said during an interview with TechCrunch at Mumbai Tech Week 2026.

Asbe envisions AI-driven solutions to simplify onboarding, protect users, and prevent fraud. He also sees AI as a key component in making voice-based interfaces a reality in India, where voice models will need to become more accurate.

India's fintech landscape is already witnessing the adoption of AI-powered finance, with companies like Coinbase and Robinhood allowing agents to trade on users' behalf. OpenAI's ChatGPT also enables users to load personal account data to get financial advice. However, wider adoption of these capabilities is still pending.

NPCI has showcased demos of agentic commerce and payments with Razorpay, but a wider rollout is yet to occur. Asbe believes that with robust regulations and a framework, India can also adopt AI-powered finance, ensuring enough protection for users and mitigation for risk.

The NPCI's CEO also sees an opportunity for Indian companies to build small language models, which can differentiate themselves based on the data sets made available to them. He noted that NPCI has a rich data set in its ecosystem and that there is a big opportunity for Indian companies to create models that are sharp, specific, and deterministic.

NPCI has long sought healthy competition between UPI apps, but data suggests that Walmart-owned PhonePe and Google Pay have over 80% of the market share. The regulator's plan to cap an app's market share at 30% is set to take effect on December 31, 2026, unless it defers the deadline date again.

Asbe noted that UPI apps have very low switching costs and most core features are shared. He also mentioned that PhonePe and Google have invested millions in their apps to attain their market position.

"I believe that there are multiple issues why we see this concentration risk exist, and one of the important reasons is the availability of a viable commercial model. The moment we see the commercial model being available to the ecosystem, I believe newer players will start investing very heavily," Asbe said.

India's digital economy is one of the largest in the world, and investors will be looking at the regulatory landscape to invest in newer fintech solutions and make the market more competitive.

In 2024, the payment body spun off its BHIM UPI app to make it more competitive and grow its usage. While its transaction volume has grown, its overall market share is around 1%. Asbe said that with BHIM, there is no particular target market share NPCI is eyeing. But it wants to make it a sovereign and secure alternative to other apps, Asbe said.

As the NPCI looks to the future, it is clear that AI will play a key role in driving user growth, preventing fraud, and distributing credit in India's digital payment ecosystem.