INDIA ADDA – Perspectives On India

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Dikshu C. Kukreja
Dikshu C. Kukreja
Mr. V. Raman Kumar
Mr. V. Raman Kumar
Ms. Chandra Ganjoo
Ms. Chandra Ganjoo
Sanjay Bhatia
Sanjay Bhatia
Aprameya Radhakrishna
Aprameya Radhakrishna
Colin Shah
Colin Shah
Shri P.R. Aqeel Ahmed
Shri P.R. Aqeel Ahmed
Dr. Vidya Yeravdekar
Dr. Vidya Yeravdekar
Alok Kirloskar
Alok Kirloskar
Pragati Khare
Pragati Khare
Devang Mody
Devang Mody
Vinay Kalantri
Vinay Kalantri

Unified Payments Interface (UPI): Transforming India's Payment Landscape

Unified Payments Interface (UPI): Transforming India's Payment Landscape

Digital payment landscape in India
Over the past few years, the technological revolution is quite visible in governance in India. Government services have been slowly and steadily bringing on board and today last-mile delivery happens with the click of a mouse in seconds. Digital Payments transactions have been consistently increasing over the last few years, as a part of the Government of India’s strategy to digitise the financial sector and economy.

One of the major objectives of Digital India is to achieve “Faceless, Paperless, Cashless” status. The promotion of digital payments has been accorded the highest priority by the Government of India to bring each segment of the country under the formal fold of digital payment services.

During the last three years, digital payment transactions have registered unprecedented growth in India. Easy and convenient modes of digital payment, such as Bharat Interface for Money-Unified Payments Interface (BHIM-UPI); Immediate Payment Service (IMPS); pre-paid payment instruments (PPIs) and National Electronic Toll Collection (NETC) system have registered substantial growth and have transformed digital payment ecosystem by increasing Person-to-Person (P2P) as well as Person-to-Merchant (P2M) payments. At the same time, pre-existing payment modes such as debit cards, credit cards, National Electronic Funds Transfer (NEFT), and Real-Time Gross Settlement (RTGS) have also grown at a fast pace. BHIM-UPI has emerged as the preferred payment mode of users.

Digital Payment and Economic Growth
The Digital India programme is a flagship programme of the Government of India with a vision to transform India into a digitally empowered society and knowledge economy. The promotion of digital payments has been accorded the highest priority by the Government of India to extend digital payment services to every segment of the country. The vision is to provide digital payment facilities to all citizens in a convenient, easy, affordable, quick, and secure manner.

Ministry of Electronics & Information Technology (MeitY), Digital Economy & Digital Payment Division has been entrusted with the responsibility of leading this initiative on “Promotion of Digital Transactions including Digital Payments”. MeitY is coordinating with multiple stakeholders including Banks, Payment Service Providers, Central Ministries/Departments, and States/UTs, for the promotion of digital payments across the country.

The total value of digital payments during the last five financial years and in the current financial year are as under:

Financial Year


Total value of digital transactions

(In lakh crore)

Total value of digital transactions

(In US$ million)












































Note*: Data till 31st December 2022
Exchange rate as in February 2023 i.e., Rs. 1 = US$ 0.012
Source: Press Information Bureau

Coordinated efforts of the government with all stakeholders have led to significant growth in digital payments. The growth of Digital Payments in India and the availability of various easy and convenient digital payment solutions have facilitated ease of living for citizens, financial inclusion, and growth of business and economy. During the Pandemic, the availability of contactless digital payment solutions such as BHIM-UPI facilitated social distancing and continuity of businesses, including small merchants.

Unified Payments Interface
Unified Payment Interface (UPI) is a popular mobile payment method that allows the user to transfer funds from one bank account to the other, instantly and free of charge. Ever since its inception, UPI has made financial transactions much easier for account holders.

Transferring money through UPI requires each user to have an ID, termed the UPI ID. The UPI ID is a unique identification for a bank account that is used to send and receive funds from one bank to another. In UPI payment applications such as Paytm, the user does not need to enter the receiver’s UPI ID. The user can simply select the receiver’s contact from his/her phone book or enter the receiver’s contact number to send money via UPI. The UPI PIN, on the other hand, is a 4 or 6-digit personal identification number required to transfer money through UPI. Every account holder has the option to set his/her UPI PIN.

The facilitation of UPI has eliminated all the hassle related to payments. Once the sender has completed his/her UPI registration process, he/she can transfer the money with only a few clicks on a UPI payment application like Paytm.

Unified Payments Interface Features
Unified Payments Interface, widely known as UPI across India, is a product of the National Payments Corporation of India (NPCI). UPI serves as an amalgamation of several banking features to ensure ideal merchant payment and routing of funds.

UPI serves as an amalgamation of several banking features to ensure ideal merchant payment and routing of funds. In the form of a single mobile application, UPI enables instant money transfers, access to different bank accounts, bill payments, and Quick Response (QR) code payments, to name a few. Since 2016, most banks in India have been providing UPI-enabled facilities on their respective banking applications.

The features making it unique are:

  • Immediate money transfer through mobile device round the clock 24*7*365.
  • Single mobile application for accessing different bank accounts.
  • Single Click 2 Factor Authentication – Aligned with the Regulatory guidelines, yet provides for a very strong feature of seamless single click payment.
  • Virtual address of the customer for Pull & Push provides incremental security with the customer not required to enter the details such as card number, account number, IFSC, etc.
  • Merchant Payment with Single Application or In-App Payments.

Initially, UPI was operationalized as a pilot launch with 21 member banks. It was inaugurated on April 11, 2016, in Mumbai by then-RBI Governor Dr. Raghuram G Rajan. Since August 25, 2016, participating banks have been uploading their UPI-enabled apps on the Google Play Store.

Benefits of UPI
The advantages of UPI are as follows:

  • Caters to the Bottom of the Pyramid: UPI allows even small business owners such as street vendors to start accepting digital payments without the need for a Point of Sale (POS) machine in India, where payment infrastructure is poor for accepting digital payments. UPI has eliminated the need for transacting parties to know the complicated payment credentials, hence, making payments convenient and transparent for all parties involved. UPI has the potential to be a major facilitator of financial inclusion in India, enabling a large portion of the population to engage in the digital economy. This acts as one of the benefits of UPI for merchants in India.
  • Corruption Deterrent: In developing countries, digital financial transactions contribute to the reduction of corruption and reduction in the contagion of the parallel economy.
  • Simplified Payment Mechanism: It enables to use of the mobile phone as the primary payment mechanism for all transactions, including P2P, P2B, and B2P.
  • Secure sensitive information: Users of UPI can make payments through a Virtual Payment Address without revealing account credentials.
  • Notified of Future Payment: Ability to send collect requests to someone with a "pay by" deadline (i.e., P2P or B2B). It sends a "snooze" notification to the payer, allowing them to pay before the expiration date. It does not hold money in the account until the consumer has paid it.
  • Bill payment: Payment of utility bills on a single platform through the Bharath Bill Pay service (BBPS) available in UPI.
  • Open Usage: Ability to use a completely interoperable system across all payment system players without relying on closed networks and silos.

With increasing knowledge about UPI transactions and their benefits, the UPI market share in India is continuously on the rise thereby giving a clear indication with respect to the growth of UPI payments in India.  

Road Ahead
India has found itself at the centre of digital payment innovation, driven by e-commerce, consumer behaviour, progressive government approaches, and the global pandemic. While the pandemic served to advance India’s digital payment landscape, it wasn’t the only driver. India’s digital trajectory has been accelerating for a while. In 2019 – pre-pandemic – India recorded the highest fintech adoption rate in the world.

It is estimated that India’s digital payments industry will grow to more than 300% of its current size by 2025. The growth arc of digital payments is impressive, especially considering India’s previously large unbanked population. With a customer-centric attitude, India’s digital payments industry is utilizing solutions from banks, fintech firms, and the government, to make the digital payment experience as seamless and as secure as possible.

The UPI industry in India has successfully changed the future of digital payments in India, over the span of 6 years. Since its launch one-and-a-half years ago, Unified Payments Interface (UPI) has allowed full-scale interoperability in the transfer of funds. The transaction volumes have grown 123 times from 2 million in December 2016 to 246 million in June 2018, while transaction values grew 58 times from US$ 84.5 million (Rs. 7 billion) to US$ 4.9 billion (Rs. 408 billion) in the same period. Thereby giving a clear indication that the UPI transaction scope in India is on an upward trajectory.