2 PAYMENT METHOD PROFILES: DIGITAL WALLETS
A few key UPI features that have likely enabled widespread adoption include bank interoperability in connecting with mobile applications, around the clock availability, integration into multiple digital wallets, support for cross-border transactions, and the development of recurring payment support with UPI AutoPay. 357 UPI Autopay enables recurring instruction payments for items like bill pay and subscriptions. 358 As of 2025, UPI is available in India, Singapore, UAE, Bhutan, Nepal, Mauritius, Sri Lanka, France, and Malaysia with plans to expand to Japan and elsewhere. 359 One of the primary access points for UPI is via Prepaid Payments Instrument third-party applications or PPIs. These are closed, semi-closed, and open entities authorized to issue prepaid payment instruments in India and may include banks, non-banking financial companies, payments system operators and other entities approved by the RBI for such activities as purchasing goods and services, transferring funds, and conducting financial transactions leveraging the stored value or other payment types within the PPI. 360 UPI compatible apps include popular third-party digital wallets such as Google Pay, BHIM, PhonePe, and Paytm are usually accessed via QR code. 361 Merchants can integrate UPI by onboarding third-party applications, setting up a merchant bank account, performing Know Your Customer (KYC) checks, and enabling a QR code affiliated with the merchant business/bank account. 362 As of 2024, the RBI has permitted third-party applications to make and receive UPI payments from KYC-compliant PPIs aiming to “enhance flexibility for PPI holders, including users of gift cards, metro cards, and digital wallets” 363 The cost of UPI-based payments via PPIs and third-party digital wallets may involve the payment of interchange fees ranging from 0.5% to 1.1% of the transaction amount for purchases above 2,000 rupees (approx. $23 USD) at merchant locations dependent on the merchant category code (MCC). 364 Wallet issuers may pay 15 basis points for similar stored value wallet fund replenishment at or above the same threshold. 365 This cost structure introduced by the NPCI in 2023 is similar to other global interchange constructs; in this instance, PPI wallets deduct the fees during the merchant account settlement process and other stakeholders like banks and NPCI may receive a portion of the interchange fees collected. 366 As per the NPCI, peer-to-peer merchant transactions (P2PM) - classified as transactions with small merchants who have projected monthly inward UPI transactions of less than or equal to INR 50,000 – are exempt from paying interchange fees. 367 One additional development to follow is the construct of two separate QR codes for UPI and card-backed payments as peer-to-peer (P2P) and peer-to-merchant (P2M) paying experiences could become more disparate in the future driving potentially unnecessary inefficiencies. UPI-based BHIM is “preferably used for P2P or P2M Transaction using Virtual Payment Address,” and Bharat QR - jointly set up by NPCI, Visa and Mastercard – is “specifically used for P2M transactions” for card-backed payments. 368
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