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Can India Lead World Fintech Market with UPI Technology || How UPI can contribute in India’s 5 Trillion Dollar Economy Dream?

In April 2009, with an objective of integrating all the payment systems in India and for creating robust payments and settlement infrastructure Reserve Bank of India (RBI) and Indian Bank’s Association (IBA) together established an umbrella organization National payment corporation of India (NPCI), under the provision of the payment and settlement system act 2007, for operating retail payment and settlement system in India.

Facts about UPI and our market that everyone must know

RBI found that by March 2011, on an average every individual has done only 6 cashless transactions despite of the fact that over 10 million retailers agreed to accept card based transactions. So keeping this in mind RBI releases a visionary statement in year 2012, to fulfill this digital transaction gap. In their statement RBI said that by 2016 they will come up with a Safe, Efficient, Accessible, Inclusive, Interoperable and Authorized Payment System.

This new system must be a part of green initiative i.e reducing the use of paper in domestic payment market. In 2016, RBI launched UPI (Unified Payment Interface) officially in public domain.

Soon after the launch, UPI has seen exponential growth in you can check the below image

Month No of Banks live on UPI Volume of transaction (in Cr) Value of transaction (in Cr)
April 2016 21 0.00 0.00
April 2017 48 0.72 2,271.24
April 2018 97 19.008 27,021.85
April 2019 144 78.179 142,034.39
April 2020 153 99.957 151,140.66
April 2021 220 2,64.106 4,93,663.68
November 2021 274 4,18.648 7,68,436.11

India emerges out as the world’s largest real time payment market, as per ACI worldwide and global data India has conducted 25.5 billion UPI based transactions which is far more than US and China all these data Google suggested that federal reserve board should take inspiration from India and develop a Real time payment system.

According to The Economist Intelligence Unit Report 2021, India has emerged as Global Leader in UPI based transactions.

We can say that India has been able to bring a revolution in digital transaction system through UPI.

Can India replace Visa, MasterCard and SWIFT like Giants at International level

In the past if you have to transfer your money from one bank account to another then you have to send a direct instruction to your bank for that you have only two options either using your internet banking services or signing cheques. But the change what we are talking about is, these days other 3rd party companies are doing this on behalf of you. I mean to say that these 3rd party companies like BHIM (by NPCI), Amazonpay, GPay, PhonePe, Paytm, Airtel, Jio and many others, they are collecting these access from you and helping you in transferring your mentioned amount from your bank account to the requested bank account. And this whole process is as simple as sending a whatsapp message, oh I forgot to mention that these days you can transfer money from WhatsApp as well. And to facilitate this all NPCI has developed a secured backend system which is used by these 3rd party companies. And for us this whole thing is very very simple and secure, just what you have to take care is you are sending it to right person.

Challenges present in the market which was responsible for such a low digital transactions

In 2011, there were more that 1 crore plus shopkeepers who were accepting card based payment but the number of transactions done via digital mode was very less. So naturally question will arise in your mind what is the reason behind this, I am mentioning few

  • Availability of credit cards to normal Indians is very less and for operating debit or credit card a physical machine is required with proper connection and there also many time we have to listen from the shopkeeper that Link is down from Bank side. So if you can not solely depend on card based payment.
  • Merchants were charged approximately 2% of transaction by Visa and MasterCard companies which is very huge of small retailers
  • If you are transferring the payment via Internet banking then you have to ask for Bank account number IFSC code and add the person as a beneficiary, which is very cumbersome process. We can not accept that with such a Low Digital Literacy in our country people are going to use this mode of payment.
  • Cards getting stolen and cloned is very common, if you are somehow not aware of these fraud then you should watch “Jamtara sabka number aaega” Series on Netflix.

How UPI is contributing in making bank transactions simple and removing all the challenges present in the Market

I will try to answer the above questions in a simpler way keeping in mind that the reader on this page may not share a technical background. So I can say that UPI has remover the cumbersome process of entering Bank Account Number and IFSC codes and for internet banking users then adding beneficiaries which will take your complete day before a beneficiary gets added.

Now with UPI, the only requirement is the Virtual Payment Address (VPA) of the recipient like [email protected] This is modern “Mobile-First System” where the requirement of any Physical card is 0. You only need VPA which is also available in the form of QR code. Just open you UPI app and scan the code enter the amount you need to pay and UPI pin which is set by you during the setup.

QR code
QR code

I hope that you all will agree with me that in country like ours where Digital Literacy is very low, this movement of paperless digital transaction with UPI become successful only because of its simplicity.

How these Google pay, Amazon pay, PhonePe like UPI apps functions?

You have to download the app which you prefer for transaction and just give the required permissions which are asked and then add your bank account on their platform and give UPI access. Now what these apps will do is they will submit a request the collected debit request from you to your bank account every time you transact using them. As a result of which we can transact multiple times without any difficulty. The main thing which is responsible for its wide acceptance is its Multi Layer Protection security offered and lighting fast speed of transactions.

Present Global Scenario of International Payment Systems

Due to the business complexity of the payment systems, only few complaints are there in this business. Due to the Network effect, generally merchants and customers gets attracted towards the big Companies.

Because of this reason today International payment market is being controlled by few big companies such as Visa MasterCard SWIFT. Against these big giant companies UPI has been developed as an open an interoperable platform.

By the term open and interoperability, we can say that any Bank can register themselves on NPCI platform and provide UPI service to their users and any third party apps like Google pay, Amazon Pay, Paytm, Phonepe, whatsapp etc can be used by the customers for using UPI service i.e we as a customer gets multiple options to use UPI service.

UPI is also called “Policy Innovation” because of its interoperability. In India with interoperability feature offered by NPCI any UPI customer can send money to other user registered in UPI database. And for your information I must say that India is the first nation and right now the only nation where this kind of facility is available. And no body can deny this fact that this world class payment system is a revolution in FinTech industry.

Developed countries like America and European union are still using traditional methods like checks and debit card for payment transactions and on a Contra to this we Indians are using mobile based payment method. Yes we have Alipay and WeChat from China but they do not stand as a competition to our UPI because of security flaws in them. They are now so secure for payment transactions.

Infront of them today India is standing as the world’s Largest Real Time Payment market of the world.

UPI getting support and Validation from many influential World Organization.

  • Fidelity National Financial who tracks more than 40 government based payment systems Internationally, has rated UPI with their Top score of 5 STAR in term of Innovation and Customer value. This same organisation has rated Chinese banking system with 2 STAR. This rating has been done by checking their round the clock availability, speed of settlement, security and many more similar parameters.
  • Google has suggested Federal Reserve Bank of America, after seeing the success of UPI in India, to take inspiration from UPI and develop a similar platform in America. The context was for FedNow which is available in America.
  • Bank for International Settlement has also praised UPI
  • Fortune Magazine says “In the pandemic when social distancing is the most critical norm, the Unified Payment Interface (UPI) is like a godsend. The instant real-time payment system has turned out to be the best financial innovation post independence in India and has begun in earnest the process of replacing the cash economy altogether. It has contributed to make country one of the fastest growing digital economy in the world.

Article published in the Times of India about UPI

An article published on 14th September 20-21 in The Times of India with the heading says now

Pay via UPI in 10 more countries

The article says that liquid group headquartered in Singapore operates on a QR payment network which will enable cross-border acceptance of payment schemes and digital payment apps. 10 other countries like Singapore, Malaysia, Thailand, Philippines, Vietnam, Cambodia, Hong Kong, Taiwan, South Korea and Japan will also be accepting UPI payments. Liquid group will bring payment companies together that will enroll merchants in the above 10 countries, technology provided by these payment companies will allow merchants who accept your payment to accept UPA payment as well.