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UPI - India's Financial Treasure | World's Leading Light in Real-time Payments

Do you remember those exhausting days of demonetization when we had to tirelessly stand in long queues to withdraw money? Well, managing finance was probably as challenging as managing a kid. As time has changed, kids have become relatively more self-reliant, and finance seems easier to handle.

The transaction ecosystem has grown multifold in India, thanks to the rise of UPI, a Unified Payment Interface. A few years ago, we wouldn't have thought that we'd so easily be able to sign up for a subscription online and automatically set up monthly payments through your bank account.

In May 2022, UPI, India's instant payment gateway, processed 5.95 billion transactions worth Rs. 10.41 lakh crore. The report Prime Time For Real-Time 2022 by ACI Worldwide stated, "In 2021, India accounted for the most real-time transactions (48.6 billion). 

This amount was about seven times more than the combined real-time payments volume of the world's five largest economies—the US, Canada, the UK, France, and Germany—and nearly three times greater than the nearest rival, China (18 billion transactions in 2021). (7.5 billion). 

India's digital industry has expanded in distinctive ways thanks to UPI, which has also fast-tracked the country's move towards a cashless economy.

What is UPI?

UPI, a platform invented by the National Payments Corporation of India (NPCI), allows instant payment transactions across bank accounts using a standalone application. You may recharge your phone, pay electricity bills, and send money to friends online with UPI apps. It is a well-known and trusted payment gateway interface in the nation. 

The Immense Rise of UPI

Dr. Raghuram Rajan, the former RBI governor, introduced UPI on April 11, 2016, with assistance from about 21 banks. Prime Minister Narendra Modi first proposed the notion of cashless payments. The customer base was anyone who would send and receive money using digital techniques to save time and resources for the average person. UPI is now a vital component of the ecosystem of digital transactions.

Impact of Covid-19

During Covid-19, we witnessed the most drastic growth in UPI transactions while most banks and corporations were either closed or working with minimum employee capacity. The lockdown drove more people to scale up their businesses online, increasing UPI's geographic reach. Compelling major financing services and banking applications to integrate UPI transactions.

Diversification of UPI

Through technological advancements, UPI was made available for several different use cases. This includes QR code payouts, cardless withdrawing money via UPI, e-RUPI, and the introduction of UPI in the UAE and Singapore, among other applications.

Growing Acceptance and Popularity 

More than half of India's digital transactions are expected to be made through the UPI platform by 2023, with 60 billion transactions. In the financial year 2021–2022, the UPI's transaction volumes surpassed $1 trillion. 

More Indians are using UPI since the pandemic and the growing acceptance of digital technology, and it has completed over 45 billion financial activities worth Rs 83 lakh crore in FY22 and just over 22 billion transactions for roughly Rs 41 lakh crore in FY21. It demonstrates the payments system's growth in both numbers and prominence.

UPI Revolutionising Digital Payments in India

A study named "Digital payments in India: A $10 trillion opportunity" was released by PhonePe and Boston Consulting Group (BCG). According to the analysis, India's market for online payments has reached a turning point and is anticipated to grow more than triple from its existing $3 trillion to $10 trillion by 2026. 

People rely on apps like Phonepe, Paytm, Google Pay, and others for financial transactions. However, when UPI was first introduced, experts and banks were dubious about its viability in an economy like India. 

Poor access to finance and minimal financial literacy were the factors responsible. India, however, has disproved these theories, and UPI is now regarded as an integrated solution in the global payments industry.

UPI technology has not only altered how Indians make payments but has also helped many related corporations and sectors. UPI has changed how subscription-based programs and internet shopping operate, with several other firms prospering from increased UPI usage. 

With the growing demand for digital payments, India is moving towards its next big thing online credit and buy now, pay later. Offering digital payment consumers instant credit approval and easy payout facilities.

Quick Summary of UPI's Future Roadmap

UPI Will Continue to Be Free in India

A discussion paper published by the Reserve Bank of India in August asked for opinions on whether fees should be assessed for payments made using UPI and other banking systems and interchange charges for credit and debit cards.

According to the paper, a thorough examination of the policies and practices governing the imposition of fees across the nation's many payment systems was deemed necessary to determine how they increase the performance, expansion, and acceptance of those systems.

The Finance Ministry's most recently updated that the Government is not planning to impose any charges for UPI services. The finance ministry tweeted that UPI will continue to be free.

"UPI is a digital public good with immense convenience for the public and productivity gains for the economy. There is no consideration in Govt to levy any charges for UPI services, and the concerns of the service providers for cost recovery have to be met through other means," read the tweet. 

All Said and Done!

The online payment gateway UPI will probably continue to rule the digital payments market in the nation. Still, the emergence of technologies like BNPL and digital currency is anticipated to shape future digital payments. 

Buy now pay later, with its flexible services and ever-expanding reach, is a solid contender to take the financial ecosystem by storm. As more and more people adopt the notion of BNPL, its value and prominence will notch higher.

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