UPI - History

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]