The National Payments Corporation of India’s (NPCI’s) digital payment platform, Unified Payments Interface (UPI) is the best financial innovation in the wake of the norm of social distancing amid the Covid crisis. A remarkable increase in the number of UPI transactions and its value during the last fiscal (2020-21) has made the country one of the fastest growing digital economies in the world.
UPI is a digital payment platform launched in 2016 that enables seamless interbank transactions by allowing multiple bank accounts to operate using varied banking features, fund routing and merchant payments into a single mobile application. UPI also caters to ‘peer to peer’ collection request, which can be scheduled and paid as per convenience.
UPI’s growth trajectory recorded one billion transactions in October 2019, followed by a two billion record in October 2020, surpassing the value of card transactions and those with prepaid payment instruments (PPIs). The period between January 2020 and September 2020 saw a hike in UPI transactions from Rs 2,162 billion to Rs 3,290 billion. As per the NPCI data, UPI cemented itself as India’s most popular digital payments system by having UPI transactions worth $103 billion (Rs 7.71 lakh crore) in October 2021, which is 18.5 per cent higher than the September month’s transaction worth Rs 6.5 lakh crore.
The demand for online shopping and the gradual reopening of the economy since the decline of the second wave has led to this remarkable growth. PhonePay, the UPI market leader reached a peak of 1,199.51 million transactions worth Rs 2,31,412 crore and Google Pay held a 35 per cent market share with 957.01 million transactions worth 2.01,185 crore. Third in the list is Paytm Payments Bank with 401.16 million transactions worth 43,221 crore.
Regulators have played a key role in driving the UPI growth adoption by doubling the UPI transaction limit from Rs 1 lakh to Rs 2 lakh per day for verified merchants, hence also bridging the gap between real time gross settlements (RTGS) payments and removing the PSP fees for person-to-merchant (P2M) UPI transactions.
