Unified Payments Interface or UPI has revolutionised digital payments in India since its launch in 2016. In just a few years, UPI payments have emerged as the most prominent payment platform in the country, facilitating millions of cashless transactions on a daily basis. Industry experts believe UPI is poised to accelerate India's financial inclusion goals and transform how people pay and get paid in the coming years. This article examines UPI's growth trajectory so far and outlines the future of UPI in India for 2024 based on inputs from key stakeholders in the digital payments space.
Rapid growth and adoption
Launched by the National Payments Corporation of India (NPCI), UPI allows users to instantly transfer money between bank accounts without entering account details. By linking multiple bank accounts to a single mobile application, UPI has simplified payments and brought the convenience of digital transactions to the masses. According to NPCI, there are over 300 million UPI users in India today transacting on applications like Google Pay, PhonePe, and Paytm. UPI transaction volumes have witnessed a steady rise — surpassing 10 billion monthly transactions, representing year-on-year growth of over 60%.
This scale of adoption is a testament to UPI's user-friendly interface and its ability to promote financial inclusion. By facilitating hassle-free money transfers via smartphones, UPI has brought millions of unbanked and underprivileged Indians into the formal financial system. Small merchants too have leveraged UPI to digitise receipts and enhance their business operations. The platform's reach now extends beyond metros to tier 2 and tier 3 cities and rural pockets of the country.
Expanding UPI's footprint
While UPI usage is growing rapidly among smartphone users, a significant portion of India's population still uses feature phones. To onboard this demographic and accelerate rural adoption of UPI, NPCI launched ‘UPI 123Pay’ and ‘UPI Lite’ services in 2021. These allow users to access basic UPI features like account registration, payments, and balance checks through SMS and IVRS. Mehul Mistry, Global Head of Strategy at Wibmo, a leading fintech player, believes these initiatives will boost UPI's rural penetration over the next year. "UPI 123Pay and UPI Lite services will play a crucial role in expanding adoption in semi-urban and rural areas where feature phones still hold prominence," he noted in an interview.
Cross-border transactions
Industry participants in India are now eyeing the opportunity for UPI to facilitate international money transfers. By 2024, prominent stakeholders foresee UPI-enabling transactions with countries that have large Indian populations like Singapore, UAE, and others. This would provide Indian laborers and students overseas with convenient access to funds and open up new streams of remittances back home. Experts suggest that this could significantly benefit the Indian economy as well.
Discussions are currently underway between NPCI International and counterpart entities globally to actualise the vision of cross-border transactions using UPI.
New avenues and use cases
To maintain its torrid growth trajectory, UPI stakeholders are exploring adjacent areas for expansion as well. These include facilitating online educational and medical payments, digital ticketing, utility bill settlements and more through partnerships with enterprises.
Scaling UPI infrastructure
As transaction volumes continue surging, it is imperative for NPCI and the participating banks to scale the underlying UPI infrastructure to ensure smooth processes and avoid congestion. Some of the key steps include augmenting the existing server capabilities, onboarding more financial entities, and strengthening cybersecurity protocols to support UPI's expanding user base.
Developer support and incentives
To encourage innovators and fintech players to build new services on UPI, NPCI could consider initiatives like hackathons, startup grants, and reduced UPI fees. This will help foster the ecosystem and drive the development of industry-specific UPI use cases across food delivery, e-commerce, and others.
UPI international standards compliance
For UPI to facilitate cross-border money flows, it must align with prevalent ISO 20022 messaging standards. Stringent validations are underway and once approved, this will ease UPI's integration with payment gateways globally and accelerate its global adoption trajectory.
Partnerships with non-bank entities
Leveraging newer entities like merchant aggregators, insurance firms, and mutual funds can open up ancillary revenue streams on UPI. Strategic partnerships will expand the merchant network and drive the platform's growth beyond core P2P/P2M payments.
Privacy and data governance standards
As transactions swell, user privacy and data protection become critical. NPCI needs compliance frameworks to ensure sensitive financial information is secured responsibly. Governance guidelines can help optimise big data analytics from transactions for industry-wide insights as well.
UPI services launched in France, Sri Lanka, & Mauritius
The UPI service was launched at the Eiffel Tower in Paris on February 2nd, making France the first European country to accept India’s mobile-based payment system. With this, Indian tourists at the Eiffel Tower can start scanning the QR code which is generated on the merchant’s website to initiate payments. The UPI service is soon expected to extend to other merchants in the tourism and retail space across France as well as other parts of Europe.
A week after this launch, Sri Lanka and Mauritius are the latest countries to follow France’s suit in enabling UPI, which means that Indians visiting both these countries will now be able to use UPI to complete payments. This move also facilitates seamless transactions for Sri Lankan and Mauritian nationals who travel to India.
Expanding avenues
The unified payments interface (UPI) ecosystem in India is continuously expanding its reach. RuPay credit cards are now usable through UPI. This allows customers to make payments for their credit card purchases as well as other transactions using UPI.
IDFC FIRST Bank Credit Card holders can link their cards to UPI by opting for the FIRST Digital RuPay Credit Card. This effectively allows users to make contactless payments at 60 million merchant stores by scanning QR codes. It offers 3X reward points for UPI transactions above ₹2,000 and 1x reward points for lower value payments.
The FIRST Digital RuPay credit card has a joining and annual fee of just ₹199 and is instantly issued in a digital format for conducting transactions on UPI. This integration of credit cards on UPI is set to enhance payment convenience for customers.
If 2024 forecasts hold true, India will be well on its way to realising an inclusive digital economy fuelled by ubiquitous UPI-driven transactions across all strata. Convenience, safety, and financial inclusion will converge as UPI transforms the lives of ordinary Indians in the coming years.
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