Unified Payments Interface, popularly known as UPI, has undoubtedly become India’s most popular payments system. Launched in April, 2016 by NPCI, UPI is an immediate real-time mobile payment system, regulated by RBI. UPI connects multiple bank accounts with a single mobile application, that allows users to make immediate payments round the clock. UPI works on simple user interface, that allows customers to link their bank accounts to multiple peer-to-peer (P2P) payment apps (Google Pay, PhonePe, BHIM, PayTM, etc.).
Baffled by the success of UPI, Google in December’ 19, requested the US Federal Reserve Board to built similar mechanism in the United States, to be known as “FedNow”. European nations are not far behind, they are also working to create similar infrastructure in their country, particularly the UK. NPCI (National Payments Corporation of India) has also received requests from Brazil, Singapore and Bahrain about the working of UPI. Unlike the diamond one, even though world takes this Digital Kohinoor from India, the country won’t be deprived of it.
In the previous month (July’20) UPI recorded 1.49 billion transactions , which is more than the total population of China. A total of INR2.90 lakh crore worth transactions took place via UPI in July’20. To give an idea, the amount of transaction via UPI in the month was 30% more than entire GDP of Nepal. In October’19, i.e. just 3 years since inception of UPI, 100 million users were registered on the platform, making it the fastest adoption of any payment system in the world. User base of UPI is expected to reach 500 million in 3 years. Today. more than 50% of all digital transactions in the country are routed through UPI.
Aggressive expansion of UPI was led by India’s three major payment apps; PayTM with an active user base of 140 million, followed by Google Pay (67 million) and Phone Pe with (55 million). There are several other factors which led Indian households to own this Digital Kohinoor, explained below:
- Demonetisation of 2016, was a major push towards India’s digital economy, of which UPI was the prime beneficiary. Popularity of e-payments have increased since the country’s drive to denounce the beloved currency notes (Although forcefully).
- Simple, safe and hassle free nature of UPI allowed it to become the leader in electronic payment space. Unlike NEFT, IMPS or RTGS where in users have to face tussle between passwords and OTPs, UPI allows the transaction with a simple 6 digit PIN without compromising on security.
- Indians love free products and services. UPI is one such free service. Customers do not have to pay any transaction or annual fees for their receipts and payments via UPI.
- Speedy adoption of UPI by banks. There are now 164 banks live on UPI, compared to 21 at the time of inception. UPI is now available on all the internet banking apps offered by commercial banks.
- Interoperability was another tailwind for UPI’s dream run. RBI’s interoperability mandate allowed customers to make and accept payments from users of different payment apps. The interoperability creates healthy competition between rival payments providers (both domestic and international) in a bid to secure the loyalty of their customers.
- Transaction limit of up to ₹2 lakhs also made it suitable for small businesses to make and receive big payments via UPI.
The outbreak of corona-virus pandemic has also proved to be a “precious jewel on the venomous toad” for UPI, which encouraged contact less transactions. Further, we believe India’s young demographics and entrance of WhatsApp Pay in the UPI ecosystem, will further enhance the glitter of Digital Kohinoor.
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Source: NPCI, Penser, ENTRACKR