The International Monetary Fund has published a Fintech Note finding that interoperability can increase retail digital payment adoption by allowing users of different providers to transact while retaining their preferred apps. Evidence from India’s Unified Payments Interface indicates that this freedom supports user switching, lowers barriers to entry for new providers and gives incumbents stronger incentives to improve service quality. Following India’s 2016 demonetization, UPI transaction values roughly tripled from March to October 2017 while usage of a closed-loop alternative remained flat. A second natural experiment found that districts experiencing larger increases in interoperability recorded an average additional rise of INR 8 per person per month in peer-to-merchant payments during the first year after integration, exceeding 80% of their pre-integration average. The note also finds that a one percentage point lower app transaction-decline rate was associated with 4% higher transaction value in the following quarter. The note recommends pairing interoperable infrastructure or regulation with enabling investments such as broad access to bank accounts, digital identity and affordable mobile data. Policymakers may also use public payment apps and connect established providers to support early adoption, while monitoring app concentration and acting against mechanisms that undermine an open and competitive system.

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