* Study finds PPIs have become a critical enabler of everyday digital transactions, financial inclusion and innovation
* A proportionate, risk-based regulatory PPI framework is needed that safeguards consumers while preserving accessibility, innovation, and everyday digital payment use cases.
* Monthly PPI volumes nearly double to 8,750 lakh transactions—everyday use, not big-ticket spends, is driving growth
* Frequency over value: PPI adoption surges as Indians embed digital wallets into daily economic life"
Proposed changes to India's prepaid payment instrument (PPI) framework could have unintended consequences for digital payments adoption, financial inclusion, and everyday consumer transactions if not calibrated carefully, according to a new whitepaper released by Pahle India Foundation.
The whitepaper, titled "Prepaid Payment Instruments and India's Digital Payments Ecosystem: Balancing Regulatory Objectives with Adoption, Inclusion, and Innovation," examines the growing role of PPIs in India's digital economy and the potential implications of ongoing regulatory developments. The release comes amid industry discussions around the Reserve Bank of India's recently issued draft directions on PPIs and their impact on consumers, merchants, fintech firms and the broader digital payments ecosystem.
Drawing on more than six years of RBI payment system data, the study finds that PPI volumes reached 98,699 lakhs in FY 2025-26, evolving into a significant component of India's digital payments infrastructure. It facilitates billions of transactions annually across consumer payments, merchant transactions, e-commerce platforms, gig economy services, and financial inclusion use cases.
The study also finds that PPIs often serve as an entry point into the digital economy for first-time users and provide low-friction payment solutions that complement India's broader digital public infrastructure, offering a simple and low-friction way to participate in the formal digital economy. Their accessibility has made them particularly relevant for gig workers, small merchants, and financially underserved populations. This has led to the RBI Digital payment Index (DPI) rise from 217.74 in September 2020 to 516.76 in September 2025 – a 137% increase across eleven consecutive periods of uninterrupted growth.
"The evidence suggests that PPIs have become an important gateway to digital payments for millions of users. Their rapid adoption has been closely linked to convenience, accessibility and ease of use. As policymakers seek to strengthen consumer protection and operational resilience, it is important that regulatory interventions remain proportionate, evidence-based and supportive of continued adoption," said Dr. Suyog Dandekar, Senior Economist at Pahle India Foundation and co-author of the report.
The report also highlights the role of PPIs in advancing several national policy objectives, including digital payments adoption, financial inclusion, ease of living, innovation and competition. It notes that PPIs serve a diverse range of user groups, including gig workers, MSMEs, platform users, and low-income populations, helping them reduce dependence on cash, enable participation in the formal economy, and support innovation by both banks and fintech firms.
"India's digital payments success has been built on a combination of trust, innovation and ease of use. The data suggests that PPIs occupy an important space within this ecosystem, particularly for low-value, high-frequency transactions. The objective of this paper is to bring evidence into the policy conversation and contribute to a regulatory framework that protects consumers while preserving the accessibility and convenience that have driven adoption at scale," said Surabhi Singh, Research Associate at Pahle India Foundation and co-author of the report.
The whitepaper recommends a proportionate and risk-based regulatory framework that aligns compliance requirements with actual risk levels. It also calls for preserving low-value, high-frequency use cases, conducting regulatory impact assessments before major policy interventions, balancing consumer protection with ease of access, and adopting phased implementation approaches for significant regulatory changes.
The report concludes that India's digital payments success has been driven by a combination of innovation, inclusion and low-friction user experiences. Future regulatory reforms, it argues, should seek to preserve these gains while strengthening safeguards in a manner that supports continued growth of the ecosystem.
About Pahle India Foundation:
Pahle India Foundation is a homegrown think-and-action tank dedicated to putting India first by generating rigorous, evidence-based research and translating it into practical policy impact. Founded by Dr. Rajiv Kumar with a mission to fill India’s public policy ecosystem gap, it combines world-class capabilities with cutting-edge technologies to drive inclusive and sustainable economic development.
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