Unified Payments Interface (UPI), one of the most popular payment platforms in the country, has seen a monumental rise in popularity since its introduction in the year 2016. UPI as a platform was meant to facilitate the adoption of online payments in India by providing consumers and retailers a universally accepted platform that would be accessible through different service providers. And as of August 2, 2022, the UPI has recorded over six billion transactions, with the numbers projecting the transactions to cross a billion transactions a day mark in the next five years.
It has been one of the landmark concepts to have originated in India, and the testament to its success is that it is being adopted not only in India but overseas too. Earlier this year, it was announced that soon UPI services would start in France too. While the details of the service launch aren’t crystal clear yet, efforts are actively being put in to ensure everything goes according to the law of the land while preserving the easy-to-use philosophy that lies at the core of UPI.
The EU debut of UPI drove up the number of countries where UPI works from five to six. Other nations that have adopted UPI are Bhutan, Nepal, Malaysia, Singapore, and United Arab Emirates.
Not only this, in December 2019, Google took note of the success of UPI and recommended the US also set up a real-time UPI-esque payments system. FedNow, which was the payments system developed after this recommendation, finds its roots in UPI.
There are other iterations of the payments interface. For example, there is UPI 123PAY, which utilised voice activation and UPI 2.0, which was launched in 2018, enabling consumers to link their overdraft accounts with UPI.
During the peak of the pandemic, UPI hit record usage numbers and became the quintessential payment method. As the restrictions lifted and people started stepping out and carrying out their day-to-day activities, the numbers rose even higher. The ripple effects of this can be seen in the transactions recorded in July this year. As per the data released by the National Payments Corporation of India (NPCI), in July, 6.28 billion UPI transactions were recorded, amounting to over ₹ 10.62 trillion. These numbers were a seven per cent increase over the numbers recorded a month earlier, in June.
However, the road to such levels of success was not that smooth for the platform. As the number of adopters increased, the number of financial frauds also shot through the roof. Reports started flooding in about the increased rate of financial frauds occurring in the country, ranging all the way from phishing-related scams to straight-up identity theft-related crimes.
There were privacy concerns, too, as UPI apps generally required location data before processing transactions. NPCI, taking note of these developments, issued incremental mandates for different platforms. The latest addition to the list is the one that requires all the UPI apps to require prior permission from the end users before recording their location data. This change is to be put into effect by all the platforms latest by December 1. There have been multiple such mandates and consumer education initiatives put into effect by service providers and government agencies.
While the road ahead looks promising, there are a lot of things yet to be seen. There are questions unanswered and hesitancy in the minds of the ‘laggards’ if we go by the terminology of the Diffusion of Innovation theory. These will need to be addressed before we move ahead and celebrate any other success or achievement of the platform. UPI has come a long way, but there’s still a mountain to be scaled before it lands in its true and final form.
Karan Mehta
Founder and CTO, Ring
Q. With the fast-paced overseas adoption of UPI, what do you think the future has in store for UPI?
A. There will be two aspects of it. One is individual countries or individual economies. Someone like the European Union will adopt it, and someone like Japan adopt it. It will, of course change a lot of things within their own internal networks. The countries will actually see a lot more digital adoption, even in countries that are otherwise prevalent. I mean, Western economies are always accepting cards, but there are some very, very big benefits to UPI. One is you don't need the card machine. Uh, you don't need an internet connection. You don't need an electricity connection. All you need as a merchant is a QR code and a mobile phone, which could even be a feature phone. Right? All of a sudden you see that the process becomes much, much smoother for the merchant himself. (When accepting cards the merchant has to) take the card from the customer, get the customer, swipe the car customer enters a pin, a paper comes out you to store one, copy yourself, give one to the customer that goes away. Individual economies are going to see an increase in digital options.
The other thing that's going to happen is when a large number of countries are on the same network, you'll also start to have interoperability, which is very, very different. The only current mode of payment for consumers that is interoperable is Visa and MasterCard cards. Those are the only modes of payment, which you can get in India and go to Europe and use right now. And, unfortunately, you know, visa and MasterCard are almost oligopolistic companies. You know, just being in that setup, there is very less incentive to be customer friendly. There is not the right choice for the customers. Something like UPI, which is, you know, gonna make it very, very transparent and seamless to connect the payment networks of multiple countries. It will truly bring ‘customer convenience’. You'll get better features as a customer. You'll get more convenience as a customer. Imagine paying, using a PhonePe app for a baguet in France. It will be very liberating. You don't have this worry that, oh, did I take enough Forex? Uh, did I take a Forex card? Is my credit card charging me too high for an exchange fee? All of those concerns will go away.