UPI Rollout To Enhance Payment Efficiency, Reduce Transaction Costs
By Zufazlin Baharuddin
KUALA LUMPUR, Feb 10 (Bernama) -- India’s Unified Payments Interface (UPI) system, which is set to enter the Malaysian market, will enhance payment efficiency, reduce transaction costs and support smoother digital transactions between Malaysian and Indian firms, as well as for consumers and diaspora communities.
Malaysian Associated Indian Chambers of Commerce & Industry (MAICCI) deputy president Datuk Dr A T Kumararajah sees this as a positive development for bilateral economic integration and for Malaysian businesses, particularly those engaged in cross-border trade, services, travel and remittances.
“Total bilateral trade between Malaysia and India reached RM79.49 billion (US$18.59 billion) in 2025. Both leaders have agreed to accelerate local currency settlement (ringgit and rupee) to facilitate trade and reduce dependence on third-party currencies.
“A strong trade base and local currency settlement ambitions support arguments for complementary payments infrastructure like UPI to ease transactions,” he told Bernama.
Indian Prime Minister Narendra Modi, in his official Feb 7-8 visit to Malaysia, said the UPI system will soon be introduced here. There were no further details on the timeline or its implementation.
UPI is a real-time digital payment system that enables instant peer-to-peer and person-to-merchant transactions directly between bank accounts using mobile phones.
Payments can be made through a Virtual Payment Address (VPA), Quick Response (QR) codes or mobile numbers, without the need to share bank account details and are secured through two-factor authentication.
UPI Scale and Global Growth
Kumararajah said the UPI system is recognised as the world’s largest retail fast-payment system by transaction volume, handling more digital transactions than many global payment networks.
“The UPI system processed between 20 billion and 21.6 billion transactions per month in 2025, showing explosive use domestically.
“In 2025, it recorded 228.3 billion transactions compared with 172.2 billion in 2024, indicating rapid growth year-on-year,” he said.
He added that cross-border UPI transactions grew over 20-fold in 2025, from just a few hundred to more than 750,000 transactions, with transaction value jumping to over US$30 million.
UPI is already operational in Bhutan, the United Arab Emirates, Singapore, Nepal, Sri Lanka, France, Mauritius, Qatar, and is set to expand to Japan (trial), Cyprus, Malaysia, Thailand, Cambodia, and the Maldives.
UPI Adoption
Kumararajah said the Indian business community in Malaysia is reasonably well prepared to adopt the UPI system, particularly among small and medium enterprises (SMEs) and businesses that deal directly with consumers.
He said in Malaysia, over 90 per cent of SMEs accept digital payments, primarily through DuitNow QR, cards and e-wallets.
“Because the UPI system is QR-based and interoperable by design, Indian-owned businesses that already use the QR infrastructure are operationally well positioned,” he said.
The first beneficiaries are likely to be retail, food and beverage, hospitality, tourism services, education-related services, and personal services, especially those serving tourists and students.
“These sectors benefit directly from lower transaction costs, faster settlement, and higher conversion rates, particularly when customers prefer familiar payment methods,” he added.
He also revealed that over one million Indian tourists visited Malaysia and spent RM6.11 billion (US$1.4 billion) in 2024, a 71.7 per cent increase from the prior year.
“The strong growth in Indian tourism and spending underlines the commercial potential for UPI acceptance, as visitors are likely to prefer seamless, low-cost payments,” he said.
Challenges
Kumararajah said the main challenges for its implementation relate to merchant incentives, pricing clarity and perceived demand.
“Malaysian merchants already have access to multiple payment options. Adoption will depend on whether it offers clear advantages in terms of fees, settlement speed, or customer reach.
“Card fees in Malaysia typically range between one and three per cent, while real-time payment systems are significantly cheaper, which could be a strong adoption driver if communicated clearly,” he said.
He opined that another challenge is scale, as merchants will only prioritise the UPI system if they see consistent transaction volumes, particularly from Indian tourists and residents.
“Early adoption is therefore likely to be geographically concentrated in high-traffic urban and tourism areas before broader nationwide uptake,” he added.
Ensuring UPI Success
He said MAICCI recognises that deeper digital and fintech cooperation, such as through the Malaysia-India Digital Council and payment linkages between NPCI International Limited and Malaysia’s payment networks, reflects the strengthening comprehensive strategic partnership between the two countries.
“We believe the adoption of UPI should be implemented in a way that ensures interoperability with existing Malaysian payment infrastructure and safeguards for businesses, while offering new opportunities for MSMEs, exporters, service providers, and e-commerce players to tap into faster and more cost-effective payment solutions.
“We look forward to a close collaboration with policymakers, regulators and industry stakeholders to ensure that its introduction here delivers real value to the business community and supports broader economic ties between Malaysia and India,” he added.
-- BERNAMA