The UPI of India has been a game changer in digital payment sector, making the country global leader in instant payment. In 2021, India alone accounted nearly 40 per cent of the total digital transactions globally.
UPI has democratised and universalised access to financial services to anyone having mobile phone and mobile number linked to their bank account through its instant single click app-based transfer, QR code scanning, bank interoperability, and robust customer protection through two- factor authentication system.
The NPCI further launched UPI 2.0 in 2018 with several new features to increase penetration of UPI in rural areas having poor internet connectivity and lower penetration of smart phones. This enabled user having feature phone to make payment without using app or internet through UPI 123 (users just have to give a missed call on UPI number), and small amount (< ₹200/transaction) payment without using internet through UPI Lite..
Moreover, round-the-clock support service — ‘Digi Sathi’ — was introduced to address queries of the users and to provide information about various digital payment products. The introduction of these new and enhanced security features has led to exponential growth in volume and frequency of digital transaction through UPI since its launch in 2016.
As per NPCI database, transaction volumes on UPI have grown multifold from 2 million in December 2016 to 7.8 billion in December 2022, while the transaction value has risen from from ₹7 billion to ₹12.8 trillion in the same period. Interestingly, around 77 per cent of such digital transactions in December 2022 were peer-to-peer (P2P) payments and more than 90 per cent of such transaction were done through three digital payment platforms — PhonePe (49 per cent), Google Pay (35 per cent) and Paytm (10 per cent).
Given the wide adoption of UPI in India, it has also received considerable attention globally as many countries have desired to collaborate with UPI. In this regard, NPCI’s subsidiary — NPCI International Payment Ltd (NIPL) — was launched in 2020 to rollout Rupay Card Scheme and UPI in the international market.
Bhutan and Nepal became the first to deploy India’s UPI-QR code and UPI in their countries, respectively. NIPL also partnered with the Monetary Authority of Singapore in September 2021 and UAE’s NEOPAY and Lulu Financial Holdings. UPI-based transactions are already operative in these four countries.
Subsequently, NIPL also entered into partnership with networks in France, UK, Japan, Malaysia and South-East Asia. Successful integration and collaboration with the payment network of these countries will enable Indian immigrants, travellers, students to make payment in the partnering countries using UPI or Rupay Card. Adoption of UPI is also expected to bring down cost of printing and managing currency and boost commerce across hospitality, tourism and retail sectors in partnering countries. Moreover, this fintech transformation is likely to give competition to global giants like Visa and Mastercard in future.
Although the aforementioned initiatives of NPCI have brought remarkable change in the payment ecosystem in India as well as globally, there are certain challenges hindering penetration of UPI, especially in rural areas. .To achieve the goal of financial inclusion and digitalised economy, emphasis should be given on imparting financial and digital literacy, creating awareness about new products, upgrading technical infrastructure for managing increasing traffic on UPI platform and adoption of secure technology.
Ara and Pathak are IES officers. Views are personal