UPI, Biggest Disrupter Of Indian Payments System
Long gone are the days when you would see a sight of long queues outside ATMs or banks. Withdrawing and managing money was a task a few years back but today, the transaction landscape has changed significantly by just scanning a QR code. Everything is at our fingertips. From transactions of Rs 900 Cr in 2016 to UPI transactions of Rs 47 lakh crore in just 5 months of 2022, we have come a long way and that too in just 6 years. Today, it is the most preferred digital mode of payment.
UPI (Unified Payments Interface) is the a proud Made in India technology platform. It is a tech platform that allows a user to transfer money to anyone. It is a platform that links your bank accounts into a single UPI application and uses the registered phone number to carry out transactions.
Let’s get a little deeper into this space.
The Rise of UPI
UPI was launched on April 11, 2016 by then RBI Governor Dr Raghuram Rajan with the help of over 21 banks. The idea of cashless transactions was suggested by Prime Minister Narendra Modi. The target audience was everybody who would use digital methods to transfer money that would cut the time and energy of a common man. Today, UPI is a crucial factor of the financial transaction ecosystem
The biggest surge in the UPI transactions took place
during Covid-19 when every business and banks were shut and people had fewer jobs. The pandemic in a way forced people to transact via digital means, and hence, the UPI’s demographic appeal further widened. Another factor that pushed the adoption of digital payments are the banking and financial applications. More embeddedness into the Indian banking ecosystem has helped people to access it easily. Several newer use cases of UPI were enabled through technological innovations – QR code payments, card-less cash withdrawal using UPI, e-RUPI, UPI service rolling out in the United Arab Emirates and Singapore, and other such innovations made it even popular.
Digital payments (to merchants; credit cards + debit cards + UPI) were a total of US$444 bn in FY22, comprising 24% of consumption expenditure, vs 11% in FY19 (RBI and NPCI data).
UPI makes up about 50% of this, from nil about five years ago. UPI is expected to continue this exponential growth in the future that will further revolutionize the payments landscape.
UPI Success So Far
The UPI crossed the $1 trillion mark in transaction values in the financial year 2021-22. The pandemic and rising digital adoption in the country has seen UPI being used by an increasingly larger number of Indians. In FY22, UPI processed over 45 billion transactions amounting to Rs 83 lakh crore and in FY21, it had processed a little over 22 billion transactions, amounting to about Rs 41 lakh crore. This clearly indicates the rise in volume and popularity of the payments system.
The consistent rate of growth in UPI payments means it could go up to 18% of the country’s total target of 30 billion transactions in the coming years. By 2023, UPI platform transactions are projected to account for more than 50% of India’s digital payments. UPI will remain the preferred choice for low value transactions- according to NPCI’s assessment, over 50% of UPI transactions are worth less than Rs 200 each.
What’s Next?
The next feature of UPI that is already seeing an increase in adoption is the AutoPay feature. According to industry experts and media reports, the AutoPay feature will be vital to increasing daily transactions on the platform. Meanwhile, NPCI had launched an ‘on-device’ wallet feature for the users for smaller ticket transactions. Another big move will be RBI’s announcement to carry on UPI transactions without an internet connection. This is said to open up the payments system to over 40 crore individuals. This will be a breakthrough for the rural areas that are troubled by inconsistent electricity but have the access to make online payments without the internet. Also, a big move in digital financial inclusion.
One more big feature that was announced recently was the the linking of the credit card to the UPI platform. This is expected to drive more credit penetration in the country, give more options to the consumer and overall build a wider financial services landscape for the consumer and the offerer.
UPI indeed has great future potential, it has made our lives easier and is indeed one of the safest and fastest modes of payments. It will significantly contribute to India’s GDP and boost the digital economy of the country.
