How UPI has Transformed India

UPI (Unified Payments Interface) is a real-time payment system developed by the National Payments Corporation of India (NPCI) that allows people to send and receive money instantly using a mobile. It was launched in 2016 with the aim of promoting digital payments and financial inclusion in India.

UPI enables users to transfer money from one bank account to another using a mobile phone or a UPI-enabled app. Users can also make payments to merchants or pay bills using UPI. The system works by linking a user’s bank account to a unique virtual payment address (VPA) or mobile number, which acts as a unique identifier for the user.

UPI uses a two-factor authentication process to ensure security. The first factor is a user-defined UPI PIN that is required to authorize any transaction. The second factor is a device-level PIN or biometric authentication, such as fingerprint or facial recognition.

One of the biggest advantages of UPI is that it allows users to make transactions 24/7, including weekends and holidays. UPI also has a very low transaction cost, which makes it a very affordable payment option for both individuals and businesses.

How UPI transformed India

1. Increased Digital Payments: UPI has made it much easier for people in India to make digital payments. With UPI, people can transfer money from one bank account to another in real-time, without having to go through the hassle of adding a beneficiary or waiting for the transaction to be approved.
2. Boost to E-commerce: The growth of UPI has also given a boost to e-commerce in India. With the rise of UPI-enabled apps, such as Google Pay, PhonePe, and Paytm, it has become much easier for people to buy goods and services online. UPI has made it possible for small and medium-sized businesses to accept payments without having to set up expensive payment gateways.
3. Financial Inclusion: UPI has helped to promote financial inclusion in India. With UPI, people who may not have access to traditional banking services can now receive and make payments digitally. This has helped to bring more people into the formal financial system.
4. Reduction in Cash Transactions: UPI has also led to a reduction in cash transactions in India. This has helped to reduce the amount of cash in circulation, which can help to combat corruption, tax evasion, and the informal economy.
5. It enabled small businesses and entrepreneurs to accept digital payments easily and at a low cost. Previously, these businesses may have had to rely on cash transactions or expensive payment gateways to accept digital payments. With UPI, they can now accept payments directly into their bank accounts, without the need for a separate payment gateway or device.

The rapid decline in market share of the big corporations like Visa and Mastercard is caused by UPI.