Changing the Game for Digital Payments: UPI Transactions in India

UPI is used at all levels, from street vendors to huge shopping malls, as Prime Minister Narendra Modi said at the just concluded BRICS meeting, in the context of digital payments.

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This comment is a strong indicator of UPI's pride in India's success story. Out of all countries, India now has the highest proportion of digital transactions.

PM Modi also advocated for UPI to join the BRICS alliance, which now includes six additional members. He was reported in the media as adding that there was potential for collaboration with BRICS on the (UPI) technology.

Although it has already begun on its route to achieving global supremacy, experts will be keenly monitoring UPI's entry into the BRICS alliance.

Nations converge on India's UPI

Three nations have jumped on the UPI bandwagon recently: France, Sri Lanka, and the United Arab Emirates. These three nations will now accept payments made using the digital payment system developed in India.

UPI's arrival into France is noteworthy since it allows the technology to establish itself for the first time in Europe. UPI's admission is expected to strengthen India's business links with Sri Lanka and the UAE.

Travellers from India will have little trouble utilising foreign currency, particularly in France. According to Haresh Calcuttawala, co-founder of TreZix, a B2B SaaS platform, UPI's expanding worldwide footprint will increase bilateral trade and tourism.

How did UPI help various nations?

According to Calcuttawala, the UPI framework will facilitate cross-border trade and guarantee quick and secure payments between international trading partners. UPI enables businesses to concentrate on creating trusting connections and expanding their global reach.

One of the most popular European travel destinations for Indian travellers has always been France. Additionally, the country is a significant trading partner for small and medium-sized firms in India, who stand to gain from the implementation of UPI.

India, on the other hand, is Sri Lanka's largest trading partner; the two countries' combined commerce is worth over $5.5 billion. The trading relationship between India and the UAE is very strong, particularly after the Comprehensive Economic Partnership Agreement went into effect last year.

Better prospects for the Indian fintech industry

The expanding global presence of UPI also indicates better prospects for the Indian fintech industry, which drew $4.8 billion in funding in 2022 and is anticipated to rise to a $2 trillion market by 2030.

According to Anand Agrawal, Co-Founder & CPTO of fintech startup Credgenics, this worldwide expansion offers the Indian fintech ecosystem substantial growth potential to develop and establish new commercial use cases that can be vital in fostering its acceptance.

UPI has altered how businesses are now conducted in India.

The biggest difference UPI has made is in how Indians conduct business. Cash transactions made up 90% of the overall volume in 2017 but less than 60% in 2021, according to data by GlobalData. The remaining area has been occupied by UPI and other digital transaction platforms. In India, cash is still king, but UPI has successfully carved out a market for itself.

The National Payments Corporation of India's UPI, introduced in 2016, has carried the Indian fintech narrative. The milestone of 10 billion transactions has already been reached by UPI, up from just one million transactions in October 2016.

In light of the fact that UPI accounted for 75% of retail transaction volume in 2022–2023, this number seems even more substantial.

Digital payments have been adopted more quickly thanks to smartphone use.

In India, the currency was cash. But because of widespread smartphone adoption, government initiatives for bank accounts, and affordable data, UPI became an effective and simple payment alternative, claims 'finfluencer' Anushka Rathod.

According to a report by Cebr Economic Research, the rapid and effective nature of UPI payments led to cost savings of $12.6 billion and a boost to the Indian economy of $16.4 billion in 2021.

The 2016 demonetisation campaign completely altered India's digital payments environment. Less than six months following the discontinuation of the Rs. 500 and Rs. 1000 notes, UPI's total transaction volume increased from 2.9 million to 72 million.

Cheap Internet contributed to the spread of UPI payments

UPI transactions had increased 900% from the previous year by the end of 2017. It is also important to note that 2016–17 saw the introduction of affordable data packs; India has the third-cheapest internet in the world, which definitely contributed to the spread of UPI payments outside of Tier I cities in India.

Future Prospects of UPI

Future expansion of the UPI appears promising. By 2026, UPI, which currently accounts for 75% of digital transactions in India, is anticipated to have doubled in size. According to a PwC study, UPI may represent 90% of the entire transactional volume in retail digital payments as it expands to rural areas and tier III and IV cities over the course of the next five years.

The globalisation of UPI is also quite promising. Indians spent $10 billion on international travel between April and December 2022, for instance. The expansion of UPI internationally can greatly aid in the expansion of the Indian economy given the sizeable volume of foreign trade.

Potential difficulties that UPI might encounter

With UPI going global, Visa, Mastercard, and other well-known, established global payments firms will probably present fierce competition for the payments platform. Dislodging Visa and Mastercard, which control approximately 80% of the worldwide payments business, will be a difficult task. Rathod contends that because these payment networks and platforms are cash-rich and established, they won't make it simple for UPI to expand and seize their market share and profits.

Additionally, UPI will need to upgrade its technology to serve the broader consumer base in the West. Due to UPI's low adoption rate, transfer and remittance fees will initially be expensive.

Major obstacles for UPI will be the necessity for interoperability between different payment systems and compliance with various digital rules.

To get beyond these obstacles, UPI stakeholders can concentrate on working with global payment system providers and authorities to make sure that they adhere to regional laws and norms. says Agarwal.