The success and growth of UPI have been unprecedented, not just in India but globally, according to Swamy. Currently, India has nearly 26 Cr of unique UPI users, with the transaction count crossing 628 Cr in July 2022 and the value up at INR 10.63 Lakh Cr. Better still, the Reserve Bank of India has recently allowed the linking of credit cards to UPI platforms, starting with RuPay. Prior to that, only debit cards linked to savings/current accounts could be connected with the UPI platform.
UPI payments are currently available in seven countries, including Nepal, Bhutan, such as Singapore, Malaysia and the UAE, among others. India is already in talks with 30 more countries for UPI integration.
“A lot of that credit should go to the design and architecture of the platform,” said Swamy. “As we were trying to mimic cash, three things were required. First, transactions must happen in real time. Next, it should ensure 100% value transfer. And finally, there should be anonymity (like we experience in cash transactions). Barring the last one, UPI has fulfilled the other two criteria, and that is quite significant. The security and convenience of digital payment is a big factor as you don’t have to carry cash all the time.”
“When using cash, it took double the time to serve each customer as I had to give them the correct change. Sometimes, customers just went away because we did not have change. With QR codes, it is time-efficient and easy for everyone. Customers need not carry their wallets anymore; their mobiles will do,” Vineeth summed up the UPI impact on his business.
A quick recap of the underlying technology will not be out of context here. At the core of Indian digital payments is UPI, based on the JAM (Jan Dhan, Aadhaar and Mobile) trinity. Launched in August 2016 by the National Payments Corporation of India (NPCI), it is an instant, real-time payments (RTP) system that allows interbank peer-to-peer (P2P) and person-to-merchant (P2M) transactions through QR code payments on UPI-linked mobile apps. In brief, UPI has done away with all traditional silos and democratised digital payment in a country of 1.4 Bn.
Vinay Rajak, a software engineer and a regular customer at Vineeth’s stall, leisurely sipped his coconut water and recalled the benefits of the digital payment system. It was particularly helpful and he managed to live cashless for many months without using his credit/debit card.
“From tea and cigarettes to food, rent, utility bills and everything in-between are paid via UPI. It has reduced my dependency on cards and made a big difference in my life,” he said.
But it is not the story of India’s Silicon Valley alone. Since the demonetisation in November 2016, people from rural and remote areas were hugely impacted as cash had always been the bedrock of the Indian economy. Still, the country slowly changed tack and moved towards digital payments, especially UPI, due to its ease of use and a no-fee format.
Setting the goal for UPI, India’s finance minister recently averred that UPI target is to cross 1 Bn transactions per day in the next five years.
how upi service started
As the name suggested, UPI was considered to be a unifying force. When we started it, our target was to get an active customer base of 500 million. It is nearly 200 million as of now,” A.P. Hota, former managing director and CEO of NPCI, tells Fortune India.
Bharat Interface for Money (BHIM), an Indian mobile payments app based on UPI and developed by the NPCI, has seen a growth in transactions too. The app, which reported around 14 million transactions (at a value of ₹4,504 crore) in April 2020, has reported 24.4 million (₹7,653 crore) in March 2021. Another app, Cred, has also reported a substantial fivefold growth from 0.94 million transactions (672 crore) to 4.96 million (₹5,390 crore) in March 2021.
Indian banks, especially smaller banks, have also reported a jump in their number of transactions, though the base continues to be small. Axis Bank and YES Bank have reported the fastest growth to 72.9 million transactions (2 million a year ago) and 29.1 million (1.9 million a year ago), respectively. Large-sized banks have, however, reported a slower growth. ICICI Bank, which reported 10.6 million transactions in April 2020, has shown 13.95 million in March 2021. India’s largest commercial bank, State Bank of India, reported 4.6 million transactions vis-à-vis 2.7 million reported a year ago.
According to the latest data compiled by the National Payments Corporation of India (NPCI), which manages UPI, it has reported a threefold increase during the last fiscal (2020-21) in both the number of transactions and the value and the number of banks that are live on UPI has gone up to 216 from 153 in April 2020. When the platform began operations in April 2016, there were only 21 banks on board. “It is important for national banks to create much safer inbuilt UPI methods for their customers to access. It would be much safer in terms of digital payments and if something goes wrong, you will know who to question, unlike the private apps, whose headquarters are not in our closest vicinity,” says Senthil Kumar, a Chennai-based Canara Bank employee.
“UPI has several pros-convenience, accessibility, and so on, but the cons lie in the user’s hands. If the user doesn’t use the app properly, it might lead to cons, but there are no significant cons from the UPI sector as of now,” he adds.