• Kunwar Abhay Singh

Success of UPI- by Abhay Singh


My name is ABHAY SINGH a meticulous student of grade XII. Upon writing the

research paper on DISPOSAL OF E-BATTERIES I decided to write a research



India accounted for the largest number of real-time transactions in 2021 (48.6

billion). This figure was almost threefold that of the closest challenger, China

(18 billion transactions in 2021) and almost seven times greater than the

combined real-time payments volume of the world’s leading economies – the

US, Canada, the UK, France and Germany (7.5 billion)

This is a huge achievement for a developing country like India.


UPI transactions cross Rs.80 Trillion in FY22 and are likely to touch Rs.100

Trillion. With nearly 6 billion transactions a month, valued at over Rs 10 lakh

crore and touching 260 million users, India’s UPI has become the best-

performing real-time ecosystem in the world. Digital payments have overtaken

credit cards in India, and RBI now allows UPI payments through credit card.

How did this happen? How did India become a first mover in these financial

transactions? How did India overtake America in faster and more reliable

financial transactions?

US business magazine, Fortune carried a provocative headline: “As Silicon

Valley fantasises about Web3.0, India leaps ahead on payments”.

It reminded American readers that Bitcoin and Blockchain which promised to

transform global commerce, are yet to deliver on their promises. Another

much-hyped technology, Web3.0 which was to make it all happen, still remains

a work in progress.

India created a technology much before America that is now leading the

segment as 10 more countries add to the list of countries that use UPI.

With no peer competitor, UPI has thrived thanks to its convenience and ease of

use. UPI is linked to an existing bank account and is compatible with bank apps

or third-party apps like Paytm, BharatPay, or phone pay. Though many UPI

users access the platform through their smartphones, with the launch of UPI

123, it can be used offline too. All that is required is a working feature phone.

The astounding success and popularity of UPI have been possible due to the

Reserve Bank of India’s vision, NPCI, and several fintech companies that

leveraged UPI’s technology to build their apps over it.

UPI has crossed a big milestone by crossing the $1-trillion mark in transactional

value, It has set an example for the whole world. The pandemic acted as a

catalyst in the last two years. Both the volume and value of UPI transactions

have doubled in a year, which is testimony to its success in India. It is also

indicative of India’s receptiveness to digital financial interventions and sets a

firm foundation for further similar initiatives.

UPI in Singapore and UAE The Singapore and UAE market has already been

tapped into by RuPay cards and UPI can be used for transactions across

various points of interest, including airport terminals. People traveling to

Singapore and UAE can use UPI as it is expected to solve the scarcity of

payment options due to currency conversion issues and the non-availability of

international credit or debit cards hence breaking transaction barriers.

Global partnerships and similar models The NIPL and NPCI have already

established partnerships with institutions like the Royal Monetary Authority

(RMA) of Bhutan and Network for Electronic Transfers (NETS), Singapore, for

QR-based payments through UPI.14 • These partnerships will allow

international traveler to use RuPay and UPI for transactions. • Products like

FedNow by the Federal Reserve have taken inspiration from UPI for its real-time

payments.15 The robustness of UPI in providing an interbank, open, and real-

time system that is secure and fast will help it in becoming a global player and

bringing more technological innovation into the payments space. It will help the

NIPL in becoming a major player and partner with financial institutions in

developing payments infrastructure, faster payment modes and real-time QR-

based payment systems across these international markets. NIPL will aim at

building strong relationships with various countries and helping them build card

schemes and real-time payment systems. This might also help businesses to

leverage India’s built platform for cross-border payments and enable

international travelers to use domestic cards outside India.

What sets UPI above its competitors?

1. Ease Of Transaction: This is the No.1 reason for UPI’s success. With UPI

people don’t have to remember long bank account numbers or the Indian

Financial System Code (IFSC) or Mobile Money Identifier (MMID) or any other

detail. Simply remembering the name of the person and their linked phone

number is enough. Users also need not download multiple apps since UPI

works regardless of the payment service provider (PSP) app the merchant or

their friends have.

Acceptance at a huge number of merchant locations with easy, rapid, and

frictionless payments, including the use of QR codes, is another critical aspect

in UPI’s massive size. The growth is bound to accelerate further through NPCI’s

new innovative features like AutoPay and Prepaid vouchers.

2. Speed: Earlier, before UPI was introduced (in 2016), the options available to

transfer money were Net banking or mobile banking or through the bank

branch. While the payment methods were easy, they took considerable time

and involved many formalities or processes. One had to enter the customer ID,

mobile banking ID, password, details of the transaction and the MMID if

applicable, and then the IMPS transaction would be registered. In contrast, the

UPI process is shorter—you just need to set a login PIN (app-specific) and a

UPI PIN (interoperable).

3. Easier Refunds For Failed Transactions: For transaction failures, NPCI has

devised a system through which a failed transaction is automatically reversed if

money has been deducted but not credited to the recipient within one hour.

While the refund in such cases takes a maximum of one hour, users can contact

their bank in the rare cases when this does not happen.

4. Authentication: The UPI transaction PIN is the same regardless the UPI

PSP app. This means that once the PIN is set while setting up UPI for the bank

account, it remains the same regardless of the app that the user has, i.e.

Google Pay, PhonePe, Bhim or others. This has eliminated the need to

remember the PINs for separate apps.

5. Works With Any Device: The UPI service can be accessed in more than one

way and even by people who do not use a smartphone. The RBI recently

launched the UPI 123 service, which works fully offline. All one needs is a

phone with calling functionality.

What Makes UPI Work Smoothly

UPI is structured on 4 pillars or four intermediaries

Remitter Bank: This is the bank of the person who is initiating the money-

sending transaction

Remitter PSP: The payment service provider is the UPI app that the person

who initiates the transaction uses

Beneficiary Bank: The bank of the person receiving the money from the


Beneficiary PSP: The recipient’s UPI app.

What led to the wider use of UPI and digital means of


Pandemic: The report noted that Covid-19 forced people to transact

via digital means, and hence, as a result, the UPI’s demographic

appeal further widened to now include a larger number of older people

who were previously sceptical about using it.

Demand: The report noted that UPI and IMPS is now more embedded

into the Indian financial and banking ecosystem, courtesy the many

different banking and finance applications using it.

Innovation: Several newer use cases of UPI were enabled through

technological innovations of the market participants, noted the report.

QR code payments, card-less cash withdrawal using UPI, e-RUPI, UPI

service rolling out in the United Arab Emirates and Singapore, and

other such innovations.



The United States, the epicenter of financial innovation and growth, has long

been the undisputed global leader in finance. The leadership position may,

however, see a swift change in the near future, given the tectonic shifts being

witnessed in recent years led by India’s innovative Unified Payments Interface

(UPI). It’s a stupendous success story that is revolutionising the payments

industry in the country.

On the global landscape, no other country has managed to accomplish as much

as India has as achieved with UPI. This begs the question, why is the rest of the

world lagging behind? Especially the US, the world leader in finance. We

compared India’s instant payment options UPI with the US’ nearest options

(FedNow and existing card systems).

The FedNow system created by and routed through the Federal Reserve works

like the real-time gross settlement system in India and is considerably different

from the UPI, which routes itself through a separate non-profit body, the

National Payments Corporation of India. However, it is the closest the US has

come to achieving instant remote transactions. The disparities between UPI

and FedNow illustrate the backwardness of the US system as compared to


Another advantage that UPI possesses over FedNow is the visible transaction

fee. UPI famously has no transaction fees and a Zero MDR (merchant discount

rate) policy. This helps cut down transaction costs. On the other hand, FedNow

encourages banks to collect more transaction fees. This implies a larger profit

margin for banks, at the cost of consumers, to incentivise banks to participate

in the FedNow framework and secure their interest above the interest of the

consumer, whereas UPI’s removal of transaction fees is an indicator of its

consumer-centric approach.

People in India are very price sensitive, one major reason for the establishment

of UPI was no hidden charges.

Cards are expensive for consumers, with credit card companies charging as

much as 3.5 percent per transaction, and people facing enormous interest

rates, with no price regulations imposed on them by the government. This is

reflective of the larger degree of bargaining power that the private sector

possesses in the banking industry in the US versus India because the Indian

government regulates and sets a basic price in the Indian market.

UPI has disrupted the existing status quo of the payments industry in favour of

consumers and the economy and played the role of a public good by removing

transaction fees, having a zero-MDR policy, and diluting the control of bank

portals over transactions.

This has caused the share of credit and debit card companies control over

transaction systems to shrink in India, providing a low-cost, convenient option

to the consumer and opening up the space for other fin-tech innovations.

The biggest drawback of FedNow and the card network with respect to UPI is

the transactions are not seamless and cost-effectively. This requires

cooperation between all the agents of the transaction. The RBI in India has

been able to bring together many private agents to the same framework and

streamline communication to help UPI’s growth.

FedNow, however, limits itself to only one small aspect of the entire transaction

and leaves the rest of the transaction to the private sector’s discretion.

Similarly, in the case of cards, FedNow can only access the account in the

issuing bank and does not create any pathway of communication between

different banks. Thus, each bank retains its customer base and doesn’t have to

cooperate with other banks. A lack of centralised action holds FedNow and

card systems back from being able to consolidate a large and diverse payments

sector with conflicting interests.

Change is inevitable and it is time the US adopts consumer-centric solutions

like UPI to maintain its hegemony because Credit cards and Debit cards will be

on the verge of extension because of the new technologies coming up. With

interest rates as high as 3.5 percent, people would opt for no interest rate



The report also forecast that the share of all transactions occurring via real-

time instrument was expected to increase to 70.7 percent in 2026 from the

present 31.3 percent. The report predicted that in 2026, business and

consumer level benefits due to India’s real-time instant payment were expected

to reach $92.4 billion, adding, that it will have an impact of $54.9 billion or 1.12

percent in India’s GDP.

UPI has disrupted the existing status quo of the payments industry in favour of

consumers and the economy and played the role of a public good by removing

transaction fees, having a zero-MDR policy, and diluting the control of bank

portals over transactions. Whereas the epicenter of financial innovation US is

struggling because of its methods of financial transactions and of higher

interest rates.

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