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Funding the Trade: Payment Interoperability and Retail Investors

Author

Listed:
  • Nirupama Kulkarni

    (Centre for Advanced Financial Research and Learning (CAFRAL))

  • Meghana Ayyagari

    (George Washington University - School of Business)

  • Pulak Ghosh

    (India Institute of Management)

Abstract

Does payment infrastructure shape who trades and how well they invest? We study India's Unified Payments Interface, an interoperable payment rail, using transactions of 19.8 million retail investors. A one-standard-deviation increase in exposure to early-adopting banks raises monthly transactions 6.2% and active investors 8.7%. A proprietary single-bank payment platform produces much smaller effects. Responses concentrate in small trades and cash-intensive regions and intensify around market crashes. High-and low-exposure regions converge on bank holidays, when conventional rails close. Additional trading comes from experienced investors, while long-horizon return declines fall on inexperienced investors. Thus, open rails expand participation without improving performance.

Suggested Citation

  • Nirupama Kulkarni & Meghana Ayyagari & Pulak Ghosh, 2026. "Funding the Trade: Payment Interoperability and Retail Investors," Working Papers 023617, Centre for Advanced Financial Research and Learning (CAFRAL).
    • Handle: RePEc:ris:cafral:023617
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