Unified Payments Interface (UPI)

The Unified Payments Interface (UPI) payments system has cut across the Indian socio-economic digital divide amazingly fast.

Context

The Unified Payments Interface (UPI) payments system has cut across the Indian socio-economic digital divide amazingly fast.

It is an advanced version of Immediate Payment Service (IMPS)- round-the-clock funds transfer service to make cashless payments faster, easier and smoother.
UPI is a system that powers multiple bank accounts into a single mobile application (of any participating bank), merging several banking features, seamless fund routing & merchant payments into one hood.
UPI is a payment system that allows money transfer between any two bank accounts by using a smartphone.
UPI allows a customer to pay directly from a bank account to different merchants, both online and offline, without the hassle of typing credit card details, IFSC code, or net banking/wallet passwords.

It merges several banking features, seamless fund routing & merchant payments into one hood.

UPI is currently the biggest among the National Payments Corporation of India (NPCI) operated systems including National Automated Clearing House (NACH), Immediate Payment Service (IMPS), Aadhaar enabled Payment System (AePS), Bharat Bill Payment System (BBPS), RuPay, etc.
The top UPI apps today include PhonePe, Paytm, Google Pay, Amazon Pay, and BHIM, the latter being the Government offering.
As part of an agreement, India's UPI will be linked to Singapore's PayNow.
NPCI launched UPI with 21 member banks in 2016 and today, the platform has emerged as a popular choice among users for sending and receiving money.
It also caters to the “Peer to Peer” collect request which can be scheduled and paid as per requirement and convenience.
In 2018, an upgraded version of UPI 2.0, was launched by the National Payments Corporation of India (NPCI).

Digital transactions through UPI recorded phenomenal growth during the pandemic year 2020-21 and several countries have evinced interest to learn from Indian experience so that they could replicate the model.
The value of transactions made using the UPI crossed USD100 billion in a month for the first time in October, 2021according to data from the NPCI, further cementing its position as India’s most popular digital payments system.

India’s digital payments industry is likely to grow from Rs. 2,153 trillion at 27% Compounded Annual Growth Rate (CAGR) to Rs. 7,092 trillion by 2025.
The growth is likely to come on the back of strong use cases of merchant payments, government policies including Jan Dhan Yojana, personal data protection bill along with the growth of MSMEs, growth of millennials and high smartphone penetration.

National Payments Corporation of India (NPCI) is an umbrella organisation for operating retail payments and settlement systems in India.
Founded in 2008
It is an initiative of the Reserve Bank of India (RBI) and Indian Banks’ Association (IBA) under the provisions of the Payment and Settlement Systems Act, 2007 for creating a robust Payment and Settlement Infrastructure in India.
It was incorporated as a Section 25 company under the Companies Act 1956 (now Section 8 of Companies Act 2013) and is aimed to operate for the benefit of all the member banks and their customers.
It has successfully played a pioneering role in the development of a domestic card payment network called RuPay, reducing the dependency on international card schemes.