The Unified Payments Interface (UPI) is a digital payment system that has altered the way financial transactions are conducted in India. The National Payments Corporation of India (NPCI) developed UPI as a real-time payment system that facilitates inter-bank transactions. It is a mobile-first payment platform that enables users to instantly transfer funds between bank accounts using a virtual payment address (VPA) or mobile number linked to their bank account, making it easy for users to transfer money to anyone, anywhere, and at any time.
Since its introduction in 2016, UPI has become one of India’s most favoured payment systems, surpassing traditional payment methods like cash or credit cards. UPI allows users to make instant payments without requiring them to provide bank account details or IFSC codes, making it ideal for P2P transactions, bill payments, and online purchases.
According to the Indian payments handbook –2020–2025, by PwC, since its launch, UPI had seen an exponential CAGR of 414% until FY19–20 and had become the most preferred payment product in terms of volumes. Person-to-merchant (P2M) payment, which accounts for approximately 40% of the total number of UPI transactions, had become the preferred mode of payment for both online and offline merchants. The report predicts then volume of UPI transactions to grow by seven times by 2025.
According to NPCI, UPI transactions surged 82% in FY23 to a total of 8,376 crores transactions aggregating ₹139 lakh crore, 65.3% higher compared with FY22.
UPI is indeed a one-of-a-kind payment system that has transformed the way payments are made in India. It is a real-time payment system that allows users to instantly transfer money between bank accounts using a single mobile application.
Additionally, UPI allows users to make payments using virtual payment addresses (VPAs), Quick Response (QR) codes, and phone numbers instead of bank account numbers and IFSC codes. This simplifies the customer journey, enhances the user experience, and security of transactions, and eliminates the need to share sensitive banking information.
The interface is highly secure and reliable, with multi-factor authentication, transaction limits, and real-time alerts. It allows users to make transactions with anyone, regardless of the bank they are associated with.
While other countries have mobile-based digital payment systems, UPI’s features and functionality are designed to work seamlessly with the existing banking infrastructure in India, making it distinct. The uniqueness of UPI lies in the fact that it is faceless, paperless and cashless.
Faceless:
UPI has indeed been considered “faceless” in the sense that it eliminates the need for physical cash or cheques, and transactions can be initiated and completed through a mobile device or computer without the need for any face-to-face interaction between the payer and the payee. UPI’s automated payment process eliminates the need for manual intervention in the payment system, which reduces the risk of errors and fraud. This makes the payment process quicker, more efficient, and more reliable.
Paperless:
UPI is paperless as it eliminates the need for any physical paperwork to initiate or authorize the transaction and printed transaction receipts at the end of the transaction. This also makes it a convenient and time-saving option for users, as they do not need to fill out any forms or provide any physical documentation to initiate a transaction. At the same time, reduces the risk of fraud and identity theft, as there is no need to share any physical documents or sensitive information.
Cashless:
UPI has played a significant role in India’s push towards a cashless economy by promoting digital payments and reducing reliance on cash transactions. UPI’s cashless and instant payment process has made it easier for people to adopt digital payments and has helped small merchants and businesses to accept digital payments, increasing their revenue and enabling them to expand.
In conclusion, the Unified Payment Interface (UPI) has emerged as a game-changing platform in the digital payment space in India. With the government’s push for a digital economy and the increasing trend of digital transactions, UPI is poised to play a crucial role in India’s economic growth and financial inclusion
(This article is written by Sachin Castelino, Chief Strategy & Transformation Officer, In solutions Global LTD, and the views expressed in this article are his own)
