Redefining the way Indians transact in a digital India

By Sridhar Subramaniam
Representational Photo by Blake Wisz on Unsplash

The Unified Payments Interface (UPI) has revolutionised the way Indians do their financial transactions and has paved the way for a cashless economy. The UPI is a mobile based payment system invented in India. It facilitates customers to make round the clock payments instantly. This path breaking payment system has propelled the nation into a future powered by seamless digital payments.

It was launched in 2016 and has become the most preferred mode of payment for many Indians drawn from every walk of life. From the street vendor to the multi-millionaire, thus fostering the growth of an inclusive financial system.

According to the Reserve Bank of India (RBI) data, 73% of all non-cash transactions in India in 2022 were done using UPI. UPI transactions worth Rs.139.2 trillion were done in FY 2023. Another PwC (Price Waterhouse Coopers) report claims that daily UPI transactions are likely to reach One Billion by 2026-2027. As per the report, UPI transactions will account for about 90% of all non-cash transactions.

The meteoric rise of UPI is a fascinating one. Its user-friendly interface and convenience have simplified payment procedures. It has given a fillip to small businesses and has enhanced their financial performance, paving the way for growth and expansion in new avenues. It was launched by the National Payments Corporation of India (NCPI) in 2016. In a short time, it has found wide acceptance and has, de facto, become the most preferred payment option. It is estimated that there are about 300 million UPI users and about 500 million merchants who use UPI to accept money for their businesses. This payment infrastructure enables users to link multiple bank accounts to a single mobile application, making real time, peer to peer transactions possible with just a few taps on the smart phone. It connects over 300 banks and enables seamless financial transactions through TPAP (third party application providers) like Google Pay, Amazon Pay, Phone Pe and Paytm in partnership with banking partners. Its popularity rates very high and the chasm that existed between urban and rural areas has been bridged.

While many fintech success stories have come entirely from private sector initiatives, the state backed UPI has defied norms and has proved without doubt that public -private digital financial inclusion can get the desired results if they are implemented well. Having achieved unprecedented success at home amounting almost to a near dominance, UPI is now all set for a global expansion.

UPI’s Unique Selling Proposition that could help it in its quest to get a global footprint is that it can both accelerate and reduce the cost of cross-border transactions to and from India, the world’s top remittances market. According to the World Bank, India’s remittances exceeded $100 billion US in 2022, the most of any nation in the world and it is ahead of China and Mexico, the second and the third in the pecking order.

Thus far, Sri Lanka, France, UAE, and Singapore have partnered with India on emerging fintech and payment solutions. The Indian diaspora lives in several countries across the globe and many of these countries may follow suit in embracing UPI.

NPCI’s aim to establish a home grown alternative to SWIFT has been a resounding success. It costs Indians about $13 to remit $ 200 back home. There is no transaction fee for using UPI though. It is no wonder that the remittances market is ripe for disruption. NPCI has been successful in establishing less expensive payment flows between India and the world on the country’s own indigenous digital payment rails.

One of the distinguishing features of UPI has been its ability to empower even the most disadvantaged segments of the society. It has played a significant role in integrating these segments on to the mainstream. Millions of unbanked and underbanked individuals have been brought into the formal banking system by facilitating instant hassle-free transactions. It has opened avenues for financial services such as savings accounts, loans, and insurance, enabling individuals to build a secure financial future. On the other count, it has empowered small businesses, street vendors and rural communities by providing them with a digital payment infrastructure that is cost effective, convenient, and secure.

UPI’s impact is far reaching extending beyond financial inclusion. It has become a catalyst for economic growth and development. It has paved the way for a transparent and accountable economy by reducing the dependence on cash transactions. Availability of copious data and analytics has fuelled and spawned the growth of fintech companies and start-ups driving innovation in the financial sector and creating employment opportunities.

Its seamless integration across various banking platforms and interoperability with third-party applications is another factor that has been instrumental in its easy adoption. Its open architecture allows developers to pioneer innovative solutions and has resulted in the creation of a vast ecosystem of UPI enabled apps that offer a range of services from bill payments, online shopping to fund transfers. User experience has been further enhanced in UPI 2.0 by features like overdraft facility, invoice payments and signed intent.

UPI continues to evolve with each passing day. It will propel India to great heights and even take it further into the future.

UPI, by blazing a glorious trail, has left an indelible imprint on the global digital payments landscape and by any measure of reckoning, is a resounding success.

A game changer of sorts in India’s bid to secure for itself a digital future.

Disclaimer: The views and opinions expressed in this article are those of the author.

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