The Unified Payments Interface (UPI) platform, launched by the National Payments Corporation of India (NPCI) in April 2016, has steadily become a chosen mode of payment among Indians.
According to data published in Reserve Bank of India's (RBI) annual report 2018-19, transactions on UPI-based platforms came in at Rs 8.8 lakh crore as of March 2019, a huge jump from Rs 1.2 lakh crore a year ago.
In terms of volume, UPI-based transactions increased to 5,353 million in 2018-19 from 915.2 million, a jump of 83 percent in a year, according to the data.
"The payment and settlement systems recorded a robust growth during 2018-19, with volume and value growing at 54.3 percent and 14.2 percent, respectively, on top of an increase of 44.6 percent and 11.9 percent, respectively, in 2017-18," RBI said.
UPI is a digital platform system that powers multiple bank accounts into a single mobile application (of any participating bank), merging several banking features, fund routing and merchant payments into one hood. UPI can be integrated by banks or financial service providers into their mobile applications.
The popularity of UPI lies in the fact that it's an inter-operable platform built on mobile-first principles, providing a user with the ability to send/receive/pay money instantly across the network, offering an easy and convenient payment experience.
"It has been a definite game-changer, enabling financial inclusion for the masses," says Hemant Gala, Head of Payments, Banking and Financial Services at PhonePe, which has emerged as the largest player on merchant UPI transactions.
To give a push to India's digital economy dream, NPCI, an initiative of the RBI and Indian Banks' Association, developed the Bharat Interface for Money (BHIM). BHIM is a payment app which uses UPI to make quick transactions with anyone on UPI.
Prime Minister Narendra Modi launched BHIM in 2016 to make India more financially inclusive.
What works in favour of UPI is its regulatory ease. Prepaid payment instruments (PPIs) facilitate the purchase of goods and services as well as inter-personal remittance transactions such as sending money. These payment instruments are licensed and regulated by the RBI.
"Even from a regulatory perspective, you don’t have to go for a PPI license. So there is a regulatory ease of adopting that. The convenience of the platform has attracted all the leading digital payment players to adopt it as a primary go-to market strategy," says Vivek Belgavi, partner and leader fintech, PwC India.
Though there is no case of replacing debit cards or credit cards as a mode of payment in the medium-to-long term, UPI is also set to become a key backbone for transactions. "The trend is on the upward direction and there is a lot of focus on small merchants. As more and more use cases start coming on to it, we will see it as as a key backbone of transactions," Belgavi added.
PhonePe, which is a payments container, enables payments through multiple modes - UPI, credit cards, debit cards, PhonePe wallet and partner wallets.
"UPI has seen a huge growth on our platform and we also have millions of cards saved by customers on our platform who use them on a daily basis," Gala said.
However, though UPI has gradually become popular in India because of a policy push towards digital economy, experts don't see as any one mode of payment having the capability to disrupt the market. The aim for the future would be about the rate of adoption of digital payments.
"Whatever means we see – debit card is one, UPI is a different platform – how they coexist, let the market decide. If people are using digital payments and replacing cash transactions, that is the direction in which we want the economy to move," Belgavi said.
Gala believes that there is a need for all instruments co-existing, with the customer choosing the one which provides the least friction and better experience.
"However, UPI has definitely played a big role in growing the digital payments landscape," Gala said.
Experts also feel that offline UPI payments through the QR-code would lead to further penetration and the rural market could be further tapped, as smart phones are now readily available to a large part of the Indian population.
Source: moneycontrol.com