Following UPI, India is betting on AI again: the financial sector is targeting the next digital revolution.

Over the past decade, India has transformed the way money flows, with its homegrown real-time payment system changing the payment habits of millions. Now, as artificial intelligence reshapes the financial industry, India is poised for an even greater leap forward.

From September 8th to 11th, the annual Global Fintech Festival will be held in Mumbai. Indian Prime Minister Narendra Modi will deliver the opening keynote speech, and other high-ranking officials, including Finance Minister Nirmala Sitharaman, Reserve Bank of India Governor Sanjay Malhotra, and Securities and Exchange Board of India Chairman Tuhin Kanta Pandey, will be in attendance.

The core topics of the conference focused on the potential impact of agentic AI, tokenization, and quantum technology on the financial system.

The timing of this conference is significant. India's Unified Payments Interface (UPI) processed 24.51 billion transactions in August alone, with a transaction value of approximately 29.82 trillion rupees (about US$315 billion), making it a core infrastructure of India's retail payment system.

Driven by the AI wave, whether this system can further evolve into an intelligent financial platform with autonomous decision-making capabilities has become a focus of industry attention.

AI is reshaping finance, with India showing significant potential.

AI technology has already taken root in Indian financial institutions. Major banks are using AI agents to automate operations and customer service, while algorithms are widely applied to risk monitoring, fraud detection, and borrower qualification assessment. In the future, AI is expected to further extend to scenarios with higher autonomy, such as acting as an agent for consumers to complete payments and customizing financial products.

Vivek Iyer, a partner at consulting firm Grant Thornton Bharat, said that applying AI more broadly to operations and governance could significantly reduce costs by improving efficiency.

India's demographic structure offers an additional advantage. Over 65% of India's population is under 35 years old, forming a large digital native population. Rishi Chhabra, Head of Visa India, stated:

"We are very, very optimistic about the Indian market. India has a growing young population, and the demand for digital adoption is undergoing a fundamental shift. In the commerce and payments sectors, India has the potential for leapfrog development."

Regulatory Game: Encouraging Innovation and Preventing Risks in Parallel

The expansion of AI autonomy also brings new risk exposures—from model bias and erroneous decisions to cyberattacks, and disputes over liability when AI agents make incorrect payments or financial decisions.

Globally, regulators are assessing whether existing rules are applicable to financial systems where algorithms are increasingly detached from human oversight.

The Reserve Bank of India has proposed a draft regulatory framework that requires banks to strengthen the supervision and management of AI and machine learning risks through policies approved by the board of directors, stronger internal control mechanisms, and a complete list of models.

It is understood that Reserve Bank Governor Malhotra and Deputy Governors Shirish Chandra Murmu and Rohit Jain will clarify the central bank's stance and approach to addressing the aforementioned challenges at this conference.

Nitin Sharma, founding partner of early-stage venture capital firm Antler India, points out that UPI's success lies in solving the coordination problem—allowing every bank, every app, and every merchant to "speak the same language"; while the introduction of AI will pose new governance requirements for this system.

UPI's profit model is questionable and its sustainability remains to be seen.

In addition to AI, this conference will also return to an old question that has become increasingly difficult to avoid since the rise of UPI: Who will pay for the infrastructure behind India's online payment boom?

Since 2020, UPI transactions have been exempt from Merchant Discount Fees (MDRs), directly reducing the revenue margins for banks and payment companies. Currently, the Indian government is considering allowing a fee to be charged on transactions routed via UPI.

This means that the next phase of India's digital finance needs to address two challenges simultaneously: first, how to make the payment and banking systems intelligent enough to have a higher degree of autonomous decision-making capabilities; and second, how to build sustainable business models around the infrastructure that supports all of this. These two aspects are complementary and indispensable.

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