Distributing Stablecoins: Lessons from India’s Unified Payments Interface 1 Billion Users
UPI’s financial interoperability and composability are a case study for stablecoin retail adoption, which still remains a large hurdle for global mainstream usage.
Obscured behind the veils of India’s reputation as a third world country lies its crown jewel – the Unified Payments Interface or UPI – a real-time, instant payment network created by the Indian government in 2016. Today, UPI boasts of 500 million active users, 20 billion monthly transactions, and accounts for 83% of all non-cash transactions in India. Most notably, in July 2025, UPI’s 650 million daily transactions in India surpassed Visa’s worldwide 639 million transactions. UPI is primarily used for peer-to-peer (P2P) and person-to-merchant (P2M) transactions, through mobile apps such as Google Pay and Paytm, and has become the de-facto way to transact in India.
India was and, to a lesser extent now, still is a cash-dominated economy. As such, the government’s north star in developing UPI was never to beat Visa or Mastercard but rather to digitize a financial fabric built on cash with weak and fragmented digital banking rails. Today, UPI has grown to such multitudes and embedded itself in daily Indian life through a function of some very clever design choices and lucky timing.
UPI has become a foundational aspect of the Indian financial system because of its seamless onboarding for both retail and merchants, zero fee model, interoperability across retail and banking flows, and its ecosystem of financial super-apps.
Before we dive into UPI product design choices, it would be remiss not to discuss the tailwinds provided by exogenous events that have led to UPI’s growth in the last decade:
COVID-19: The pandemic accelerated the shift from cash to QR and tap-to-pay due to health concerns serving as a core impetus for a contactless method to transact.
Smartphone Adoption: India experienced a hockey stick growth in terms of smartphone ownership (750 million+ today vs ~230 million in 2016) and a sharp 95% compression in data costs (from US prices of $4.5 per GB before 2016 to $0.16 GB by 2017) driven by Reliance Jio’s launch – a telecom operator that disrupted the market by giving away free SIM cards and undercut competition by betting on high volumes to offset lower margins.
How UPI Product Design and Pricing Strategy Led to Mass Adoption
While India’s smartphone/internet moment and COVID-19 boosted UPI adoption, there were strong product design choices that led to a highly sticky product.
Identity/Onboarding: Analogous to SSN numbers for identity verification in the US, “Aadhaar” numbers in India serve as quick verification/KYC methods for Indian nationals. However, until Aadhaar numbers were rolled out in 2014, India did not have a digital central registry of identification. As a precursor to the concept of UPI’s digital payment offering, India needed to build its identity verification stack from the ground up. Manually KYC’ing the world’s largest population of 1.5 billion people was a massive but necessary undertaking as it enabled scalable, cheap, and instant onboarding to UPI. Another important caveat here is that, at the time of UPI’s rollout, ~75% of India’s population was unbanked. As such, UPI onboarding used Aadhaar OTP in lieu of a debit-card, reducing paperwork/approval processes and fast-tracking users to be able to transact from day 1.
Merchant Fee Rebate: Retail stores in India often run on razor thin margins. To avoid losing 2-3% in interchange fees, most retailers bypassed card networks by primarily operating in cash. In 2019, UPI nullified the merchant interchange fee, leading adoption and volumes to skyrocket. While interchange fees are subsidized by the government, the economic growth from UPI has far outweighed the subsidy costs.
True Financial Interoperability: In the US, P2P rails (Zelle, Cash App, Venmo, etc) are separate from P2M (Visa, Mastercard, Amex) and B2B (ACH, Fedwire) rails. UPI, on the other hand, is fully integrated across all financial touchpoints and serves as India’s universal layer for P2P and P2M transactions with integrations across all major Indian banks, payment providers, and merchants. Furthermore, since UPI is built on top of IMPS (analogous to ACH in the US) SMB B2B payments can also be conducted on IMPS/UPI with real-time settlement. By enabling P2P, B2B, P2M payments all under one platform, India’s payments ecosystem is wholly interoperable.
Hyper-Composability: Since inception, UPI has offered an open-source API which accelerated development around UPI use cases. This might come as a surprise to many readers, but India’s second largest financial app is Google Pay. These UPI-apps such as Google Pay, PhonePe, and Paytm are the true manifestation of “financial super apps” – where users can pay their (and even other people’s) phone bills, utility bills, book movie tickets, flights, hotels, shop online, earn cashbacks, and even participate in IPOs – without ever leaving the app and funds moving instantly in real-time from their bank accounts using UPI rails.
Free Point-of-Sale: As alluded to earlier, India’s financial rail == cash especially with street side shops and vendors exclusively transacting in cash given the expensive price tag on card terminals. Today, 24% of all UPI transactions are grocery purchases. UPI bypassed the capex of physical terminals by enabling payment acceptance through QR codes which can be cheaply printed and/or displayed on any mobile device and are uniform across all payment platforms/wallets. Over the past year, QR codes in India have seen a YoY growth of 126% with 75% of new QR code deployments being in Tier-2 and Tier-3 cities and towns, highlighting the fact that UPI is not a metropolitan phenomenon but rather has embedded itself into rural financial transactions. Today, everyone from a street-side fruit seller to a luxury clothing store accepts UPI through a QR code.
Stablecoin Distribution Wedges
The proliferation of retail stablecoin adoption is a non-trivial undertaking. While there are clear step function improvements in using blockchain rails for institutional use cases including cross border payments, agentic payments, and more, I want to focus on what could serve as distribution wedges for retail stablecoin adoption with UPI as a case study:
Universality and Democratization: UPI is universal and free – payments can be sent and accepted from any device or underlying banking partner, the onboarding experience is very seamless as a payee or a merchant, and the myriad of financial tools available through UPI lowers both capex and opex for small businesses. The fact that India went from a majorly unbanked, cash-run economy to one where any UPI user can participate in IPOs is a testament to how democratization of financial velocity can serve to uplift socio-economic conditions. In that sense, blockchains offer access to global financial velocity and offer similar improvements on archaic incumbent rails as did UPI for cash. Crypto wallets today are approaching frictionless onboarding through solutions such as key-management infrastructure providers like Turnkey, and seamless on/offramps such as Moonpay.
As we discuss in the points below, blockchains and stablecoins democratize financial services by a step-function improvement for end users (retail and enterprise) but still struggle with creating an easy user experience due to asset fragmentation. For instance, a user should not have to decide if they want to pay for their morning coffee using USDC/USDT/USDE on Tempo/Arc/Plasma/Stable but rather these backend decisions and processes should be completely obscured on the frontend.
Stablecoin Differentiation & Adoption Lanes:
Financial Opportunity Access: Onchain products offer a suite of financial levers that were reserved only for HNWIs. For instance, HNWIs “take profit” by borrowing against their stock holdings and forgoing a taxable event in the process, while retail users are unable to access those strategies on brokerage platforms. On the other hand, regardless of size, overcollateralized loans against holdings is commonplace in DeFi as a strategy to access cash against assets and as a means for obtaining capital efficient leverage. Furthermore, while yield from stock lending is allowed on platforms such as Robinhood, borrowing against those stocks is prohibited, reinforcing the loop of market makers/high-frequency traders being able to borrow capital for cheap and make outsized returns while retail is artificially restricted from capital efficiency that is trivial in DeFi.
Consolidation: With stablecoin chains such as Plasma exploring the neobank approach, we see a consolidation of the vertical stack of savings, credit, and payments within one framework. Blockchain rails offer improvements on incumbent payment methods (at least in the US) while DeFi yields (lending rates, basis trade) significantly outperform market rates on high-yield savings accounts. The widespread adoption of financial super-apps built on UPI rails champions the “all-in-one” narrative for growth – which makes consolidation-of-stack neobank approaches quite exciting.
Interoperability: Just as UPI uses the same protocol across multiple payment functions and (B2B, B2C, P2M, etc.) and can instantly settle into any financial rail (banks accounts, wallets, and more), stablecoin adoption by major payment institutions, banks, and fintechs is rapidly expanding the interoperability and utility of blockchain-based payments globally. Incumbents like Visa are expanding pilots for merchants to settle instantly using stablecoins rather than prefund accounts in its Visa Direct product, and new entrants like Ubyx* are enabling stablecoins to be accepted, redeemed, or swapped anywhere, any time, without an on/off ramp.
As stablecoins approach an inflection point in their lifecycle, execution on distribution becomes critical and perhaps UPI’s transformation of India’s cash economy into a digital ecosystem can provide some broad guide rails. UPI’s core design principles of seamless onboarding, interoperability across retail and semi-institutional use cases, zero fees, and an open system of financial super apps served as genuine impetuses to abandon cash and move towards digital money. In this next chapter for stablecoins, mirroring the adoption levers of comparable tech like UPI, could be a driver of sticky adoption across retail and enterprise.
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