The Unified Payments Interface (UPI) is a groundbreaking innovation in the digital payments landscape that has managed to permeate the Indian socio-economic digital divide at an astonishing rate. Despite its impressive track record, concerns regarding the payment system’s reliability and security have led to apprehension among individuals and businesses.
Unified Payments Interface (UPI): An Overview
UPI, an advanced version of Immediate Payment Service (IMPS), is a round-the-clock funds transfer service aiming to make cashless transactions faster, easier, and smoother. The system brings together multiple bank accounts into a single mobile application, offering numerous banking features and streamlined fund routing and merchant payments. UPI currently leads other 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.
Top UPI apps include PhonePe, Paytm, Google Pay, Amazon Pay, and BHIM, with the latter being the government’s offering. As per an agreement, India’s UPI will be linked to Singapore’s PayNow, broadening its reach. Initially launched with 21 member banks in 2016, UPI’s journey has been noteworthy.
Achievements of UPI
During the pandemic year 2020-21, UPI facilitated digital transactions to record phenomenal growth. This remarkable performance attracted several countries keen to replicate the model, expressing interest in learning from the Indian experience. In October 2021, UPI transactions exceeded USD100 billion in a month for the first time, according to data from the NPCI. This milestone further solidifies its position as India’s most popular digital payment system.
India’s digital payment industry is projected to grow from Rs. 2,153 trillion at 27% Compounded Annual Growth Rate (CAGR) to Rs. 7,092 trillion by 2025. This growth is expected due to strong use cases of merchant payments, government policies like Jan Dhan Yojana, personal data protection bill, the growth of MSMEs, millennials and high smartphone penetration.
Challenges Faced by UPI
However, UPI faces several challenges, including increased cybercrime threats in the global banking and financial services industry amid the coronavirus pandemic. Malicious Software Cerberus, fraudulent claims, chargebacks, fake buyer accounts, promotion/coupon abuse, account takeover, identity theft, card detail theft, and triangulation frauds stand as considerable obstacles.
About National Payments Corporation of India (NPCI)
NPCI serves as the umbrella organization for operating retail payments and settlement systems in India. It’s an initiative of Reserve Bank of India (RBI) and Indian Banks’ Association (IBA) under the Payment and Settlement Systems Act, 2007. As a “Not for Profit” company, NPCI has been devised to deliver infrastructure to the Banking system in India for physical and electronic payment and settlement systems.
The Way Forward
To harness the power of market players for greater digital infrastructure, access, and literacy for the Indian population, a well-structured Public-Private Partnership (PPP) policy could serve as a 21st-century engine. A public policy-driven digital empowerment could ensure responsible digital conduct catering to consumers’ interests and the larger public interest in our vibrant Indian democracy.