You’re in line at a café. When you reach the counter, you tap your phone to pay—only to be told, “Sorry, we only take Apple Pay. You’re trying to use Google Pay.” You sigh and leave without your coffee.
This minor frustration reveals a major challenge: Digital payments are not always as convenient as they sound. As is often the case with infrastructure—digital or physical—we notice only when it doesn’t work well. What’s missing here is interoperability: the ability of different payment apps, banks, and platforms to connect seamlessly.
Many digital payment systems are like walled gardens. If you and the person you are paying do not use the same payment provider, the transaction is not possible. Private platforms prefer to keep users within their domains, also known as closed-loop systems.
Interoperability turns walled gardens into public squares, where everyone can transact with anyone. You use your favorite app, and the other party uses theirs—and the payment goes through.
Our recent research shows that this freedom of choice drives two major benefits (Copestake and others 2025). The first is a better user experience. Consumers choose their favorite apps based on what they value, including ease of use, reliability, or language options. The second is more innovation. Providers must consistently deliver and improve, since switching is easy, and users are not locked in.
Digital acceleration
Our work draws on India’s rapid transition to digital payments and finds that interoperability can empower consumers, foster innovation, and accelerate the shift away from cash.
In 2016, the country launched the Unified Payments Interface (UPI), which allows payments to be sent and received easily across all participating apps and banks. The system has transformed India’s payment landscape and become the largest real-time payment system in the world by volume, processing more than 19 billion transactions every month.
Tellingly, most UPI transactions take place across different apps, which would not be possible if they operated only as closed-loop systems. At the same time, cash use has declined. UPI’s is a story of digital acceleration unlocked by interoperability.
Many users initially joined UPI through trusted apps, often offered by their banks. The UPI operator also launched BHIM, a simple public app to help introduce the system to new users.
As UPI gained traction, more than 200 apps and most banks entered the market. And interoperability allowed users to move freely to newer, better apps—without having to persuade other users to shift at the same time.
This flexibility meant new entrants could both enter more easily and scale up more quickly. Incumbents had to raise their game. More reliable apps—as measured by transaction failure rates—pulled in more users. Over time, reliability improved across the board.
