The Rise of UPI in India

Aug 14, 2018 | 11 months ago | Read Time: 2 minutes | By CA Sandeep Vinod Kanoi

In a very short period of time India has come a long way in the online payments segment. With the launch of IMPS, RTGS, NEFT transferring cash between accounts has been made simple, easy and instant through electronic means. In a recent past, a new payment system has been launched by National Payments Corporation of India known as UPI (Unified Payments Interface).

UPI is a unique payment system that permits the user to link multiple bank accounts with a single mobile app and by which a user can initiate fund transfers without referring to the IFSC code or account number of the payer (user).  In the UPI payment system funds are instantly credited on a real-time basis. Furthermore, UPI also gives the user a facility to make ‘collect’ request. A UPI user only requires virtual address (known as a Virtual Payment Address) in order to make any online transactions. As mentioned above, this online payment system was developed by the NPCI, however, the same is regulated by the Reserve Bank of India (RBI).

There has been staggering growth in UPI payments, since its debut in 2016, on the other hand only a small growth is being witnessed in physical cards. This stunning growth in UPI payments has been attributed to various cashback deals that UPI services offer. The reason of the low growth in the physical cards (in comparison with UPI) is not only because banks failed to offer attractive cashbacks, but also the 2 % charges on card transaction have also worked against their usage.

The rise of digital payment in the form of UPI payment system will be the foundation stone in making India a cashless economy and will be music to PM Narendra Modi’s ears. As making India a cashless economy is a serious agenda for the Prime Minister Narendra Modi’s government. Demonetisation was one of the few ways for making India a cashless country. After the demonetisation, the government of India has boosted their digital transactions with apps like BHIM, Bharat BillPay and Bharat QR. Recently, the Twitter handle of BHIM (Bharat Interface for Money) which is managed by NCPI, tweeted that there have been seen a growth of 30% in UPI transaction for the month ended in June 2018 compared to the previous month.

As per the latest data revealed by NCPI, a total of 246.37 million UPI transactions were initiated in June 2018 which was more than 30.02% of transactions made in May 2018. In terms of value, UPI transactions in June 2018 stood at Rs 40,834.03 crore, rising by 22.66% from Rs 32,288.51 crore in May month.

Only in a few months, UPI has become the most preferred form of digital payment in India. The interface of the UPI payment system is compatible with most of the banks and many e-wallets, and mobile payment apps are embracing UPI. Some of the mobile apps include PhonePe, Paytm, Google Tez, Airtel Payments Bank and the like. Apart from this are many third-party apps including banking apps that are coupled with the UPI system and also the social media platforms are trying to associate with the UPI system. UPI payment system makes the process of fund transfer simple, quick and hassle-free.

Today’s world runs on mobile as mobile is the future, though its security standards have been scrutinised. Rise of UPI payments heavily depends upon the growth of mobile infrastructure and ease of use.

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