The Most Underrated Innovation in India

In 2020, I paid a vendor from a town in Odisha using UPI. He had owned a smartphone for eight months. He had never had a bank account before JAM, Jan Dhan, Aadhaar, Mobile, made it possible. He knew exactly how to receive a payment. The smoothness of that transaction was not luck. It was infrastructure that had been built deliberately, at scale, over a decade.

The Indian startup ecosystem generates enormous coverage. Unicorn counts, funding rounds, founder profiles, the narrative of Indian tech innovation is well-documented and enthusiastically amplified. Almost none of this coverage focuses on what I think is the actually interesting story: the infrastructure layer underneath.

The most significant Indian innovation of the past decade is not a startup. It is not a product. It is a set of design decisions made by a small number of people in government institutions about how to build shared infrastructure that would eventually enable a generation of products.

The NPCI as unsung protagonist

The National Payments Corporation of India, a nonprofit organization established by the Reserve Bank of India and a consortium of banks, built UPI. This fact is barely mentioned in most discussions of India's fintech boom, which tends to focus on the apps (PhonePe, Google Pay, Paytm) rather than the rails they all run on.

UPI is an interoperable payment infrastructure. Any bank can connect to it. Any authorized application can use it. No single company owns the network, which means no single company can extract rents from access to it, exclude competitors, or optimize it for their own interests at the expense of the overall system.

This design decision, that payment infrastructure should be a public good rather than a proprietary platform, is the reason India's digital payments market looks so different from payment markets in most other countries. The competition is fierce because the infrastructure is open. The innovation is rapid because no gatekeeper controls access. The adoption is mass-market because the costs of access are low.

This is not a market outcome. It is a policy and institutional design outcome. And it was not obvious or inevitable, it required specific people making specific decisions to resist the easier path of licensing proprietary infrastructure to incumbents.

What makes it innovative

The innovation here is not technical in the narrow sense. The underlying technology of UPI is not exotic. What is innovative is the governance model: open, interoperable, nonprofit, designed explicitly to prevent the concentration of control that has characterized payment infrastructure in most other markets.

This model has now been studied and partially replicated in other contexts. The ONDC (Open Network for Digital Commerce), incorporated in 2021 with pilot operations beginning in 2022, is an attempt to apply the same logic to e-commerce: open network, interoperable, no single company owning the rails. The Account Aggregator framework applies it to financial data. The Health Claims Exchange is attempting something similar in health insurance.

The pattern is consistent: identify a domain where infrastructure controlled by private incumbents creates structural problems for competition and access; build open, interoperable infrastructure at the public level; enable private innovation at the application layer above it.

Why this matters beyond India

The reason this is interesting beyond India is that it provides an existence proof for an alternative to the platform concentration model that has dominated digital development in most countries.

In most markets, the infrastructure for digital services is controlled by a small number of large platforms. This gives those platforms structural advantages that are difficult to dislodge through conventional competition, because control of the infrastructure layer creates compounding advantages at every layer above it.

India's experience with UPI suggests that an alternative is possible: public infrastructure that is genuinely open, genuinely interoperable, and genuinely governed in the public interest. The political economy required to create this is not simple, it requires navigating incumbent resistance, building institutional capacity, and sustaining political will through the long gestation period before the infrastructure produces visible results.

But it is possible. And India doing it at the scale it has done it, with the outcomes it has produced, makes it the most important innovation story that the startup coverage almost entirely misses.

UPI processed 172 billion transactions in 2024, growing 46% year-on-year, reaching 16.73 billion in December alone. By ACI Worldwide data, India accounts for approximately 46% of all real-time payment transactions globally. The apps that ride on UPI are well-known. The infrastructure underneath them is the actual story.

The vendor in Odisha who received my payment in 2020, eight months into owning a smartphone, no bank account before JAM, understood this intuitively. He didn't care who built UPI. He cared that it worked. That is the measure of good infrastructure: it becomes invisible because it is reliable, and it reaches people who had no access to the system before it was built.

The innovation is not the app. It is the design decision to build payment infrastructure as a public good - open, interoperable, owned by no single company. That decision, made by a small number of people in a government institution, produced a payment system that served 16.73 billion transactions in December 2024.

Manas Majhi grew up in Junagarh, Kalahandi, Odisha. He writes about opportunity, development, and the systems that fail to distribute either equitably. He is the founder of Majhi Group and Majhi OS.

See also: Digital Public Infrastructure, Building for a Billion People, How 4G Changed India

Sources

NPCI UPI Product Statistics: transaction volume data

UPI 2024 annual transaction growth: DD News

ONDC: Open Network for Digital Commerce

ACI Worldwide: Prime Time for Real-Time Global Payments Report