From street vendors to expansive shopping malls, UPI has become ubiquitous, facilitating transactions at every level of the Indian economy.
Pavitra Pradip Walvekar
"In the heartbeat of every transaction, the success of UPI resonates, transforming the way India pays." - Pavitra Pradip Walvekar
In recent years, the Unified Payments Interface (UPI) has emerged as a revolutionary force, reshaping the Fintech landscape in India.
Unified Payments Interface (UPI) is a real-time payment system developed by the National Payments Corporation of India (NPCI), allowing users to link multiple bank accounts to a single mobile application. Since its inception in April 2016, UPI has radically simplified digital transactions, providing a seamless, instant, and secure platform for peer-to-peer and peer-to-merchant payments.
In August 2023, the Unified Payments Interface (UPI), overseen by the Reserve Bank's non-profit agency, the National Payments Corporation of India (NPCI), achieved a milestone by surpassing 10 billion monthly transactions. This marks a remarkable growth of over 50% year-on-year, as August 2022 recorded 6.58 billion monthly transactions. Notably, the network approached the 10 billion threshold in July, with 9.96 billion transactions, following a marginal sequential drop in June from the preceding month.
Pavitra Pradip Walvekar, the Pune-based promoter-director of Kudos Finance and Investments Private Limited shares, “The journey of UPI has been rapid, with the system reaching the 1 billion monthly transactions mark for the first time in October 2019. Impressively, it took less than four years for UPI to experience a fourfold increase in adoption, showcasing its significant impact and widespread acceptance in the digital payments landscape. This just goes to show what a soaring success UPI has been!”
From street vendors to expansive shopping malls, UPI has become ubiquitous, facilitating transactions at every level of the Indian economy. Today, India stands out globally as the country with the highest volume of digital transactions, showcasing the widespread integration and acceptance of UPI across diverse segments of society.
Global Adoption of UPI
On February 7, 2023, PhonePe made a significant announcement, expanding UPI support for international payments in countries including UAE, Singapore, Mauritius, Nepal, and Bhutan. This development allows users to make payments in international currencies directly from their Indian bank accounts. Furthermore, a definitive agreement between NIPL and PPRO Financial, confirmed on April 27, 2023, is set to enhance the acceptance of UPI among international payment service providers (PSPs) and global merchant acquirers.
In another move, the Reserve Bank of India (RBI) extended UPI payment facilities for inbound travelers from G20 countries. Transcorp International is facilitating UPI One World for nationals arriving from G20 nations. A notable addition is the introduction of the UPI Wallet facility for foreign tourists in India, offering a seamless experience. Once set up, users can add funds using their preferred debit or credit cards and make payments at over 20 million stores across India with no commission fees. This UPI wallet, including apps like Cheq UPI, ensures expedient transactions for tourists in various locations, from roadside tea stalls to luxurious five-star resorts.
“UPI has gone global, and it is a huge feat for the government but we can’t ignore how easily Indians were able to accept and adapt to this new tech. Today all we need is our phone and a click on the phone and our payment is done!” explains Pavitra Pradip Walvekar
UPI and lending
The UPI is poised to embark on a significant advancement by facilitating the provision of loans to customers. The announcement by the Reserve Bank of India (RBI) permitting pre-sanctioned credit lines through UPI has the potential to transform the landscape of credit disbursal in the country, potentially making traditional borrowing methods obsolete.
Decoding how UPI affects lending, Pavitra Pradip Walvekar explains, “UPI makes disbursements, collection, and reconciliation fast and cost-effective. Bank transfer for loan disbursements especially smaller loan sizes, like 50k would cost more and take up to 2 hours to transfer via RTGS customer's account. Now with UPI, the transaction is instantaneous and no to minimal cost all done via API.
UPI helps collections by setting up a mandate on UPI rails. Collection costs go down as field visits and cash collected by collection agents is a time-consuming and cumbersome process. Now a customer can simply click on a link sent by a lender and pay against his loan in real-time.”
Further expressing a positive outlook, Pavitra Pradip Walvekar says, “UPI could become the piping for the Central bank digital currency. This will allow programmable money to be introduced in lending, thereby eliminating misuse of loans taken by the customer. For eg: when a customer takes a loan for education purposes, there is no way to ascertain if the customer used the funds as intended. With programmable money the loan taken can only be used for education purposes. The future looks bright for more innovations to be built on top of UPI.”
In 2022-23, UPI accounted for 75% of total retail transactions, a figure expected to rise to 90% within the next five years. Projections indicate that by 2026–27, UPI transactions will reach 1 billion per day, a substantial increase from 1 million in October 2016. The success of UPI has led to the accelerated launch of UPI 2.0, introducing features such as one-time mandates, overdraft facilities, invoicing for transparent payments, and signed intent and QR facilities for enhanced security and swifter transactions.
In conclusion, UPI stands as a beacon of innovation and efficiency in the world of Fintech, transforming the way transactions are conducted and paving the way for a more connected and accessible digital economy. Talking about UPI integrating credit cards on the RuPay network, Pavitra Pradip Walvekar explains “This is a big leap from it being a bank-to-bank transfer, to it now having more use cases. This makes UPI interface ubiquitous and becomes the infrastructure on which all flow of funds will occur.”
As different countries recognize and integrate UPI principles into their financial frameworks, the future promises exciting possibilities and challenges for this groundbreaking payment system.