Around 145 million families have no access to any form of banking. There is also the problem of tackling black money and corruption that happens mostly in cash.[A1]
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 is part of the Green Initiative to decrease the usage of paper in domestic payments market.[A2] UPI was officially launched in 2016 for public use.[A3]
Under RBI guidance, NPCI became the primary body tasked with developing a new payment system that is simple, secure, and interoperable. UPI works on four pillar push-pull interoperable model where there will be remitter/beneficiary front end PSP (payment service provider) and remitter/beneficiary back end bank that settles the monetary transaction for the users. According to CEO of Netmagic Solutions, UPI became one of the most successful deep-tech innovation coming out of India.[A1][A4]
In December 2019, noting the success of UPI, Google suggested Federal Reserve Board to follow UPI as example in developing FedNow,[A5] a real-time payment system for United States.[A6]
With exponential growth of UPI, India became the world's largest real-time payment market with 25.50 billion annual transactions in 2020 per data from ACI Worldwide and GlobalData, ahead of China and United States.[A7]
As per the Economist Intelligence Unit Report 2021, UPI made India a leader in global real-time payment market followed by China and South Korea.[A8]
After the decision of Ministry of Finance to nullify merchant discount rate (MDR) in 2019 from UPI, the number of low value transactions skyrocketed making huge gains on real-time transaction volume data.[A9][A10]
Nations such as Brazil, Bahrain, Saudi Arabia, Singapore, United States and European Union are now trying to emulate the success of UPI in their own market.[A10][A11]
From January 1, 2019, UPI became a popular payment option for initial public offerings (IPOs). The transaction limit was enhanced from ₹100,000 to ₹200,000 in March 2020.
From December 2021, RBI again increased the limit to ₹500,000 for Retail Direct Scheme and IPO applications.[A12]
To make UPI economically feasible for payment companies, RBI is considering merchant discount rate (MDR) on future UPI transactions.[A13]
In its first monetary policy for financial year 2022–23, RBI proposed cardless cash withdrawal facility from ATM using UPI based QR code.[A14]
In partnership with NSDL Payments Bank and NPCI,
ToneTag launched VoiceSE which will enable 400 million feature phone users to make UPI payment using voice in
Hindi, Tamil, Telugu, Malayalam, Kannada, and Bengali languages.[A15]
Sources:
[A1] Datta, Dhriti (13 September 2019). "The origins of UPI: Road to a cashless society | Digit". Digit. Retrieved 19 May 2021.
[A2] "Payment Systems in India: Vision 2012–15". Reserve Bank of India. 1 October 2012. Retrieved 19 May 2021.
[A3] Panda, Subrata (2 November 2020). "UPI transactions surpass 2-billion mark in October on festive boost". Business Standard India. Retrieved 20 August 2021.
[A4] Patnaik, Somya (18 July 2019). "UPI will push India over the digital payments finish line". American Banker. Retrieved 22 June 2021.
[A5] "Google wants US Federal Reserve to follow India's UPI example and build 'FedNow'". mint. 14 December 2019. Retrieved 21 November 2022.
[A6] "Google wants US Federal Reserve to follow India's UPI example and build 'FedNow'". Mint. 14 December 2019. Retrieved 19 August 2021.
[A7] Singh, Abhinav (31 March 2021). "India retains top spot in real-time digital payment transactions: Report". The Week. Retrieved 19 August 2021.
[A8] "Going digital: payments in the post-Covid world". Economist Intelligence Unit. 4 August 2021. Retrieved 23 August 2021.
[A9] "No MDR charges applicable on payment via RuPay, UPI from Jan 1: Sitharaman". The Economic Times. Retrieved 23 August 2021.
[A10] "India leads real-time payments market after China and South Korea". Tech Wire Asia. 23 August 2021. Retrieved 23 August 2021.
[A11] Dethe, Amol (17 December 2019). "Not just Google, the world is watching India's UPI". ETBFSI.com. Retrieved 23 August 2021.
[A12] "Reserve Bank of India to introduce UPI based payment solutions". The New Indian Express. Retrieved 8 December 2021.
[A13] Shukla, Saloni (9 December 2021). "RBI to form panel to study digital payment charges". The Economic Times. Retrieved 9 December 2021.
[A14] Ojha, Sangeeta (14 April 2022). "How to withdraw cash from ATMs using UPI: Cardless cash withdrawal explained". Mint. Retrieved 16 April 2022.
[A15] "UPI voice payment in Hindi, Tamil, Telugu, Malayalam, Kannada for feature phone users with VoiceSE. Details". Financial Express. 10 September 2022. Retrieved 14 September 2022.