The Unified Payments Interface (UPI) is an instant payment system developed in India, by the National Payments Corporation of India (NPCI). The interface facilitates inter-bank peer-to-peer (P2P) and person-to-merchant (P2M) transactions. It is used on mobile devices to instantly transfer funds between two bank accounts. The mobile number of the device is required to be registered with the bank. The UPI ID of the recipient can be used to transfer money. It runs as an open source application programming interface (API) on top of the Immediate Payment Service (IMPS), and is regulated by the Reserve Bank of India (RBI). Indian Banks started making their UPI-enabled apps available on the Google Play Store on 25 August 2016. It is widely considered to be one of the most successful payment systems in the world, in terms of the number of users, the volume of transactions, and the number of transactions.
As of November 2022, the platform had over 300 million monthly active users in India. The proportion of UPI transactions in total volume of digital transactions grew from 23% in 2018–19 to 55% in 2020–21 with an average value of ₹1,849 per transaction. It enabled over 2,348 transactions every second in 2022.
In Aug 2023, there were several news reports and articles were published about the BFSI sector. Data from NPCI shows that 10.5 billion transactions were recorded on the platform in August, up from 9.9 billion in July 2023. As of August 2023, UPI has crossed 10 billion transactions. UPI also recorded Rs 15.7 lakh crore in August, slightly higher than the Rs 15.3 lakh crore record for July. In FY 2023, the value of annual transactions reached $1.7 trillion, out of which $380 billion is in merchant payments.
UPI hit a record of 10 billion transactions worth in August 2023. The number of monthly UPI transactions rose 58% year-on-year in May, making it the highest volume and value ever recorded.
India has shared its UPI technology with many countries including France, Australia, Singapore, UAE, Saudi Arabia, Oman, Nepal, Bhutan, Sri Lanka and others.
History
In April 2009, the National Payment Corporation of India (NPCI) was formed to integrate all the payment mechanisms in India and make them uniform for all retail payments. By March 2011, RBI found out that in India, only six non-cash transactions were executed each year by individual citizens while 10 million retailers accepted card-based payments. Around 145 million families had no access to any form of banking. There was also the problem of tackling black money and corruption that happened mostly in cash.
RBI in 2012 released a vision statement for a period of four years that indicated commitment towards building a safe, efficient, accessible, inclusive, interoperable, and authorized payment and settlement system in India. It was also part of the Green Initiative to decrease the usage of paper in the domestic payments market. UPI was officially launched in 2016 for public use.
Under RBI guidance, NPCI became the primary body tasked with developing a new payment system that is simple, secure, and interoperable. UPI works on a four-pillar push-pull interoperable model where there will be a remitter/beneficiary front-end PSP (payment service provider) and a remitter/beneficiary back-end bank that settles the monetary transaction for the users. According to the CEO of Netmagic Solutions, UPI became one of the most successful deep-tech financial innovations India has produced.
In December 2019, noting the success of UPI, Google suggested that the US Federal Reserve Board should follow UPI as an example in developing FedNow, a real-time payment system for the United States.
With the exponential growth of UPI, India became the world's largest real-time payment market with 25.5 billion annual transactions in 2020 per data from ACI Worldwide and GlobalData, ahead of China and the United States.
As per the Economist Intelligence Unit Report 2021, UPI has made India a leader in the global real-time payment market followed by China and South Korea. After the decision of the Ministry of Finance to nullify the merchant discount rate (MDR) in 2019 from UPI, the number of low value transactions skyrocketed, making huge gains on real-time transaction volume data. Countries such as Brazil, Bahrain, Saudi Arabia, Singapore, the United States, and the European Union are exploring options to implement a UPI-like system in their own domestic markets.