The case for network-level interoperability of QR codes in India’s digital payments ecosystem
Abstract
India has achieved unprecedented success in digital payments, largely propelled by the Unified Payments Interface (UPI) and the widespread adoption of quick response (QR) code-based merchant payments. This paper analyses the unique factors driving UPI’s growth — including its user-centric design, regulatory flexibility, zero merchant discount rate (MDR) policy and the proliferation of asset-light QR infrastructure. However, despite this remarkable progress, a crucial challenge persists: the lack of network-level interoperability in UPI QR codes. This structural limitation has led to systemic concentration, exposure to network outages and inconsistencies in merchant onboarding, all of which constrain further financial inclusion and undermine the resilience of the digital payments ecosystem. Drawing lessons from successful QR interoperability models such as Singapore Quick Response code, Malaysia’s DuitNow QR and Indonesia’s efforts to enhance the Quick Response Code Indonesian Standard, this paper argues that true scheme- and network-level interoperability is not merely a technical upgrade but a strategic necessity. It would expand consumer choice, enhance merchant acceptance while reducing costs, strengthen system-wide resilience and foster inclusive innovation. The paper also highlights the crucial role of banks in the acceptance ecosystem and emphasises that their continued engagement is essential for achieving economies of scale, sustainable revenue models and infrastructure resiliency. We propose a road map of important policy actions, including the establishment of a unified QR code standard, mandatory network-level interoperability, infrastructure modernisation, scheme-agnostic security frameworks and enhanced regulatory oversight. The paper also recommends that the Reserve Bank of India urgently reconsider the licensing of new umbrella entities (NUEs) to mitigate the overall concentration risk in India’s digital payment ecosystem. While acknowledging implementation challenges, the paper contends that India must act decisively to address existing gaps and evolve towards a more inclusive, competitive and future-ready digital payments architecture. These insights also hold important lessons for other countries building similar ecosystems, underscoring the importance of designing QR-based acceptance infrastructure with interoperability and public interest at the core. This article is also included in The Business & Management Collection which can be accessed at https://hstalks.com/business/.
The full article is available to subscribers to the journal.
Author's Biography
Mahadevan Balakrishnan has been a pivotal figure in the digital transformation of payments in India, making significant contributions through leadership roles in major banks and at the National Payments Corporation of India (NPCI). As the Chief Operating Officer at NPCI, he played an instrumental role in developing innovative payment systems such as the Immediate Payment Service (IMPS) — which forms the foundation of Unified Payments Interface (UPI) and the instant payments ecosystem — Aadhaarenabled payments, the National Automated Clearing House (NACH) and the RuPay domestic card scheme. The NPCI’s neutral, not-for-profit and collectively governed model has since become a global standard for digital public infrastructure. Following his tenure at NPCI, Dr Balakrishnan advised over two dozen developing countries on enhancing financial infrastructure and digital payment ecosystems during his work with the World Bank. His career spans more than three decades and includes senior roles at leading financial institutions such as ABN AMRO, Barclays, Citibank, DCB Bank, as well as NPCI and the World Bank. This extensive experience positions him at the intersection of policy, technology and institutional design within the payments domain. Dr Balakrishnan holds multiple degrees, including an MBA in finance, a master’s in political science and public administration, a master’s in bank management and a PhD in finance and payments. Currently, he is a postdoctoral research fellow at the Centre for Digital Public Goods at the Indian Institute of Management Bangalore. He has published over 30 articles in national and international journals and serves on the editorial boards of two leading journals focused on payments and banking. His primary research interests encompass payments — particularly fast and instant payments — and the development of digital public infrastructure.
R. Srinivasan is Professor of Strategy and Chairperson of the Centre for Digital Public Goods at the Indian Institute of Management Bangalore. His areas of research and teaching include digital public goods and digital public infrastructure, protocols and open networks and platform business models. He has published articles in international journals and books on strategy and platform businesses and engages with industry and the government on various consulting and policy assignments.
