THE UPI WAVE IN INDIA AND
LATEST TRENDS IN THE PAYMENT SYSTEM
Ever since the pandemic hit India, the country has witnessed many people embracing digital modes of payment. A few years earlier this was not the norm as many were reluctant to part with cash transactions. Even before the pandemic, demonetization had forced people to resort to digital modes of transactions.
From people being compelled to take up the path of digital payments to these becoming usual today, it has a lot to do with the convenience and quickness offered by these online modes of payment.
The introduction of UPI (Unified Payments Interface), a real-time-based payment system by the NPCI (National Payment Corporation Of India) revolutionized the arena of digital payments. It is at present a standard method of payment preferred by the majority. With each passing day, the digital world is taking new strides, resulting in evolving payment methods.
Evolution of digital payments
When the internet debuted in the 1980s, it definitely opened up a realm of opportunities and was a cherished blessing for people. With everyone using it for several purposes, the possibility of making transactions over the internet was considered.
The first attempt at digital payments was made during the year 1994. The Stanford Federal Credit Union is referred to as the first company to have introduced a digital transaction facility for their clients.
Fast forward to the year 1998, PayPal came into being and it is considered the first company to specialize in digital payments. It continued to innovate new payment methods like ones using email addresses and payment apps.
One of the first countries to digitize government payments was South Africa. They had started doing it even before COVID-19 shook the world. According to Master Card’s New Payment Index report 2022, 95% of consumers in South Africa had used at least one new digital payment method in the past year.
Due to the gradual shift to online shopping and banking services combined with the advancements in technology, digital payments have found a firm foothold in the lives of a major chunk of the population.
In a world where people are looking for instant satisfaction, the speed, convenience and security offered by these digital modes of payment make them a preferred choice.
Digital payment landscape in India
During the year 2016, one fine November, notes of denominations 1000 and 500 were banned in India by Prime Minister Narendra Modi.
The sudden decision did have a huge impact. People were forced to queue up outside banks to exchange the demonetized currency notes and various unorganized sectors of the Indian economy were seriously affected.
This compelled some of them to explore digital payments. In the same year Reliance’s Jio spearheaded the move towards digitalization by launching their high-speed connectivity services and making the internet accessible to a wider section of the population. It was launched with the goal of making data abundant and affordable.
With their launch, Jio provided 3 months of unlimited free calls, 4GB of free data each day and free SMS service in a bid to win more subscribers. These offers made a majority of the population addicted to using the internet and increased its consumption. In addition, the launch of the JioPhone, an affordable smartphone, also popularized digitalization among the population of India.
But the breakthrough for online payments happened during the COVID-19 phase. Due to strict lockdowns and social distancing rules, people were forced to depend on digital transactions. Even people belonging to the senior citizen and less technology-savvy category were left with no option but to get used to it.
Over the last five years, India’s digital payment landscape has climbed to an average annual rate of around 50%.
Emergence of UPI in India
The year 2016 saw the onset of another remarkable decision in the form of the introduction of UPI. It was a revolutionary move that aimed to make transactions smoother, more secure and faster. The major goal of UPI was to enable access to multiple bank accounts within the same platform for an individual’s ease of use.
It was launched by the NPCI and the RBI (Reserve Bank Of India). This system also helps combine several banking features, helps route funds seamlessly and organizes all merchant payments under a single umbrella. It also caters to the “Peer to Peer collect” request, which can be scheduled and paid as per one’s requirements.
What are the features of UPI?
Some of the features of UPI are as follows:
- Faster transactions around the clock
- One single platform to access multiple bank accounts
- Easily carry out merchant transactions, in-app purchases, utility payments, QR code payments, etc.
- Provides a single click two factor authenticated payment system
- Customers are not required to enter sensitive details such as card numbers, CVV, etc.
- Prevents the troubles involved in carrying physical cash
How has UPI benefited the Indian economy?
It is indeed astonishing how the introduction of UPI has pioneered a digital revolution for payment systems in India. Transactions have become efficient and people no longer worry about carrying cash in hand.
The main objective behind the launch of UPI was to encourage more people into adopting digital payments, which has been achieved. It is also a free service that helped fuel its widespread adoption. Since UPI is an initiative of the government, it has helped increase the trust factor for a skeptical section of the population.
The UPI system is very simple and easy to use and that helped cover many users even those who weren't much financially literate. It has helped support businesses like fintech companies, and several small businesses. The real-time money transfer system that enables transactions seamlessly has been a real boon for many of them.
Latest UPI payment trends in India
Within six years since its launch, UPI has grown to be the most preferred method of payment relied on by a majority of the Indian population. According to the latest data released by NPCI, UPI saw a record of 6.8 billion transactions, amounting to a total of ₹11.7 trillion September 2022 alone. The significant growth in the adoption of UPI shows how much the country is progressing towards a digitized economy.
UPI 2.0 was launched in the year 2018. It is an upgraded version of the initial UPI that permits people to link their overdraft account to UPI which was not possible earlier. It also helped the consumer check the authenticity of the merchant’s credentials by scanning the QR code to ensure they are UPI verified. It also consists of a unique “ Peer to Peer function” allowing users to schedule and perform their transactions according to their convenience.
One of the latest UPI payment trends to materialize is the ability to make offline payments using a QR code. This is made possible by UPI lite, which is a lighter version of the original UPI platform. Launched on September 20, 2022, the feature enables one to make low-value transactions faster using the local wallet on one’s phone. It also enables feature phone users to transfer money with the help of UPI just like smartphone users.
Most of the debit transactions on UPI lite can be carried out without using the internet ; however, credit transactions would require the use of the internet.
The upper limit set for UPI lite payments is ₹ 200 but the total wallet balance can go up to ₹ 2000. The transactions carried out using UPI lite will not be visible on one’s bank account statement. A user can carry out UPI lite transactions, once they add the required amount of funds online. They will be able to carry out payments without giving any additional authorization or use of the UPI pin.
Only the top-up amount will be visible on the wallet and the summary of daily transactions carried out will be sent by the NPCI over SMS.
Another latest UPI payment trend that went live this year was the facility to link credit cards with UPI. This is enabled with government-backed Rupay credit cards.These cards will be linked to a UPI Id, providing secure and faster transactions.
With the Rupay card being linked to UPI, one can make payments without swiping them on a POS (Point Of Sale) machine. All you need to do is to scan the QR code and choose the added credit card to make the payment.
This move comes with its own set of advantages. Consumers will get more opportunities to utilize their credit cards and merchants can benefit from the increased consumption as a result.
Future of UPI payments
Since UPI continues to have a lot of fans in India, it will take the major place among all digital payment methods in India in the coming years. Due to its convenience factor, zero transaction cost, user friendliness and immense security, it has managed to earn the trust of the average Indian consumer.
In a latest development, the NPCI has partnered with the UK's (United Kingdom) payment solution provider PayXpert to enable the acceptance of UPI transactions in the UK, starting with QR code based transactions. This will enable use of UPI for in store payments on all PayXpert POS machines. Later Rupay cards will be augmented too.
This partnership will benefit all Indian travelers and Indian residents in the UK by providing them with a familiar and convenient mode of payment.
Earlier in 2021, Bhutan had become the first country to embrace India’s UPI system and Nepal followed suit this year.
It is indeed a proud feeling to see UPI growing and expanding to foreign lands for the citizens of India. The country is in the process of making UPI global. Perhaps in the coming years, people would be able to transact seamlessly without borders posing a hindrance.
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