Introduction
India’s digital payments revolution is often defined by one word, UPI. The Unified Payments Interface has transformed the manner in which money moves, making transactions instant, interoperable and accessible. However, the next phase of India’s digital financial journey may not be about making payments faster. It may be about making financial opportunity easier to access.
The next stage of India’s digital financial ecosystem is likely to be shaped by the convergence of Artificial Intelligence (“AI”), Account Aggregators (“AAs”) and Digital Public Infrastructure (“DPI”). Together, these technologies can move the financial sector beyond payments and towards more personalised, data-driven and inclusive financial services.
The larger question, however, is whether India can move from a successful digital payments architecture to an ecosystem that delivers credit, investment, insurance and financial advice in a manner that is not only frictionless, but also responsible and trustworthy.
From Instant Payments to Instant Financial Opportunity
UPI solved a fundamental problem: how to move money instantly between parties. The next challenge is substantially more complex: how to enable individuals and businesses to access the right financial product at the right time.
A person may be able to make an instant payment while still facing difficulties in obtaining credit, demonstrating creditworthiness or understanding appropriate financial products. Thus, financial inclusion cannot be measured merely by the number of digital transactions. AI, AAs and DPI have the potential to address this gap. AI can analyse financial behaviour and generate personalised insights. AAs can facilitate consent-based access to financial information. DPI can provide interoperable infrastructure through which these services can operate.
The shift is therefore from transaction enablement to financial intelligence.
AI and the Question of Algorithmic Accountability
AI could fundamentally alter how financial institutions assess risk, detect fraud and interact with customers. Credit assessment, financial planning, customer support and fraud detection are all areas where AI can reduce cost and improve efficiency. However, financial decision-making cannot become a complete “black box”. If an AI-driven system rejects a loan application, identifies a transaction as suspicious or recommends a financial product, questions of explainability and accountability immediately arise. This becomes particularly significant where AI systems rely on alternative data. A model may identify correlations that are commercially useful but difficult for consumers to understand or challenge. Algorithmic bias may also reproduce existing inequalities while appearing technologically objective.
Consequently, the future of AI-driven finance should not be determined solely by accuracy. Explainability, auditability, human oversight and meaningful grievance redressal must form part of the architecture itself.
Account Aggregators: Does Data Empower the Consumer
The Account Aggregator framework has the potential to address one of the structural problems of Indian finance: fragmented financial information.
Through consent-based data sharing, individuals can potentially provide lenders and financial institutions with a more comprehensive picture of their financial position. This may reduce information asymmetry and enable more efficient credit assessment. Yet the effectiveness of an AA ecosystem depends upon whether consent is genuinely meaningful. A consumer who clicks “accept” without understanding what information is being shared, with whom, for what purpose and for how long has technically provided consent, but may not have exercised meaningful informational control. As financial data becomes increasingly valuable, the regulatory challenge will therefore be to ensure that data portability does not become data exploitation. The consumer must remain at the centre of the consent architecture.
DPI and the Expansion of Embedded Finance
India’s DPI can provide the infrastructure required for financial services to move beyond traditional banking interfaces. Credit, insurance, investments and other financial services may increasingly become embedded within platforms that consumers already use.
This can significantly reduce friction. However, embedded finance also creates regulatory complexity because multiple entities may participate in a single financial transaction. If a consumer suffers loss, who should be accountable: the regulated financial institution, the technology platform, the intermediary or another service provider? The answer should increasingly depend upon function rather than form. Regulatory responsibility cannot disappear merely because a financial service is delivered through a technology platform.
Can India’s Digital Financial Model Go Global?
India’s digital financial infrastructure has attracted global attention because it demonstrates how public infrastructure and private innovation can operate together at scale. However, replicating this model internationally cannot simply mean exporting technology.
The success of India’s digital ecosystem is also connected to its institutional architecture, regulatory environment and interoperability standards. As India seeks to internationalise its digital financial infrastructure, the focus should therefore remain on outcomes rather than adoption alone. The relevant questions should be whether such systems improve access to credit, reduce transaction costs, strengthen consumer protection and promote meaningful financial inclusion.
AMLEGALS Remarks
The evolution beyond UPI represents a fundamental shift in the philosophy of digital finance. UPI largely removed friction from the act of payment. The emerging ecosystem seeks to remove friction from the entire financial decision-making process. This distinction is important. When payments become instant, the principal risk is transactional fraud. When credit decisions, financial advice and product recommendations also become automated and real-time, the risks become substantially broader, including algorithmic bias, opaque decision-making, excessive data collection and inappropriate financial recommendations.
In our view, India’s competitive advantage should not be measured by how much financial activity can be digitised, but by how responsibly that activity can be digitised. The convergence of AI, Account Aggregators and DPI can create a financial ecosystem in which a consumer’s financial information moves seamlessly and financial services are delivered contextually. However, this ecosystem will succeed only if consumers retain meaningful control over their data and meaningful recourse against automated decisions.
Regulation, therefore, should not attempt to prevent technological evolution. Instead, it must ensure that innovation develops with appropriate safeguards built into the system from the outset. Privacy, cybersecurity, explainability and consumer protection should be treated as design principles rather than post-incident remedies.
For any queries or feedback, feel free to connect with Hiteashi.desai@amlegals.com or Khilansha.mukhija@amlegals.com