UPI – Enabling the Digitalization and Formalization of Indian Economy!a

According to National Payments Corporation of India (NPCI), Unified Payments Interface (UPI) achieved a remarkable milestone by crossing 10 billion transactions in a month. At a global level, this widely-used payment service is processing 40% of the global real time payments (as per Ritesh Shukla, CEO of NPCI International Payments Limited).

Source: Centre for Monitoring Indian Economy, Volume in million

UPI – An Interface that continues to evolve and add Useful Features

• UPI making inroads into other countries, making travel increasingly convenient

  As Europe becomes the latest region to accept India’s payment systems, the Government is making significant strides in expanding the network of its digital payment systems globally. Countries that have embraced different forms of Indian payment systems include France, UAE, Saudi Arabia, Bahrain, Singapore, Maldives, Bhutan, and Oman.

  As per a statement (February 13, 2023) made by Ashwini Vaishnaw, Minister of Railways, Communications, Electronics and Information Technology, India has signed memoranda of understanding (MoUs) with 13 countries that want to adopt the UPI interface for digital payments, with Singapore already having completed its UPI integration.

  These global partnerships have come through as the NPCI International Payments Limited is forging partnerships with different countries to build interoperability. Interoperability will build an acceptance network for RuPay and UPI, which will allow Indian travellers to make payments via these channels in their destination country of travel.

• Credit Cards on UPI

  NPCI introduced a feature for linking the RuPay Credit Cards to UPI in September 2022. The process of linkage is hassle-free, as it is similar to linking of a savings bank account or debit card to UPI.

  Since RuPay promotes anti-phishing technology and uses high-end EMV chipset, these cards enable a safe and secure mode of transactions. Furthermore, with RuPay Credit Cards on UPI, while customers benefit from the ease and the increased opportunity to use their credit cards, merchants benefit from the increase in consumption. The reason for the same is that these merchants can exist in the credit ecosystem, with the acceptance of credit cards using asset lite QR codes.

• UPI LITE making Low Value Digital Payments simple and fast

  UPI LITE, launched by the Reserve Bank of India in September 2022, is a digital payment service designed by the NPCI. Through this service, users can send up to ₹200 with a single tap from their UPI LITE account.

  With this service not requiring a user to enter his / her PIN to initiate a payment, this experience is intended to enable low value transactions, without utilizing a Remitter bank’s core banking systems in real-time, while providing adequate risk mitigation.

How is UPI adding value to the Indian Economy?

• IndiaStack – Enabling Long Runway for Growth of Digital India

  India has seen an increasing adoption of Internet by smartphone users. With IndiaStack, the Government’s vision is to widen the access of financial services by building a digital infrastructure through a robust public-private partnership. Through the multiple layers of this stack – digital identification, interoperable payments and trust developed through a “paperless layer” of the stack allowing for verification of digital documents, UPI is expected to add value by furthering the Government’s “Digital India” initiative.

• Formalization of Indian Economy

  In India, for a long time, the lack of verifiable identification, low levels of financial literacy and inclusion, and the absence of historical financial data had hindered the provision of financial services to most of the population. With the setup of Aadhaar, one of the cheapest identity projects in the world, and other low-cost digital public infrastructure projects like UPI, these constraints have been overcome, leading to a higher formalization of the Indian Economy.

Conclusion

UPI has become ubiquitous in the recent times. As per a Press Release by Press Information Bureau (PIB) dated March 19, 2023, the digital payments system has grown rapidly, and is now used by close to 30 crore individuals and 5 crore merchants. While 40% of all payments happen digitally in India, 50% of these digital payments are classified as small or micropayments (quoted by Mr. Dilip Asbe, Managing Director of NPCI).

Going forward, India’s digital consumption is expected to increase across different platforms. Hence, the large-scale adoption of UPI and the Government’s penchant for constantly enhancing innovation, productivity, formalisation and efficiency bode well for the Indian economy.

Sources: NPCI, CMIE, PIB, International Monetary Fund, and other publicly available information

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