The proliferation of the Unified Payments Interface or UPI has been a phenomenon like no other. From a small tea shop to a pricey showroom, UPI is everywhere. With over 100 million monthly active users in India, and a jump of a whopping 427% in usage between March 2020 and August 2022, the growth of UPI has been colossal. After the staggering success of the first phase, UPI is gearing up for its next phase of growth.
Some trends that are going to be worthy to watch out for are:
The growing adoption of UPI has made it a favorable payment acceptance method even at small outlets like vegetable vendors or paan shops. This has resulted in about 50% of UPI transactions being less than Rs 200 in value. This, in turn, resulted in cluttered low-value transaction entries in an individual’s bank account statement making them as long as 20-30 pages, creating hassles when applying for loans, visas, etc. UPI Lite will solve exactly this problem. It is a lighter version of UPI and is aimed at reducing the burden on bank systems. It is currently live with eight banks.
UPI Lite will be available on the BHIM app and all a user has to do is add some funds (up to Rs 2000) to their UPI Lite e-wallets. Whenever a transaction is less than Rs 200 in value, the user will automatically be prompted to switch to UPI Lite mode to complete the transaction. The feature is designed to work in near-offline mode. For settlement, the user only receives one SMS per day for UPI Lite transactions and these low-value transactions are not displayed in the users’ bank account statements. This makes UPI Lite a win-win for both banks and customers.
UPI-Credit Card Linkage:
In what is being called a game-changing move toward India’s digital payment system, the NPCI (National Payments Corporation of India) and the RBI (Reserve Bank of India) governor Shaktikanta Das, launched the UPI payments via credit card.
Currently, the UPI is linked to the customer’s savings or current account via the debit card. To facilitate such payments in an offline mode, consumers’ RuPay credit cards will be linked to a Virtual Payment Address (VPA) or a UPI ID. Customers can use the UPI app to scan QR codes and pay with their saved Rupay credit cards.
This feature is expected to have significant penetration in the middle-income group of people because it will allow them to use their credit cards for small transactions, which in turn will benefit the card provider and merchant.
So far, to make a transaction via UPI, a user was required to have a smartphone and an internet connection. UPI 123Pay is a newly launched instant payment system that will allow users to make UPI transactions without an internet connection. Aimed at increasing financial inclusion for rural India, this payment method will be extremely beneficial for feature phone users.
UPI payments expected to go global:
NIPL (NPCI International Payments Limited), the international payments arm of NPCI is making efforts to take UPI to a global level. Implementations of interoperability between UPI and other countries’ payment apps are already underway. So far, NIPL has signed an agreement with Singapore-based Liquid Group to enable UPI QR-based payments in ten countries, including Japan, South Korea, Thailand, and the Philippines. In addition, France, Bhutan, Nepal, Malaysia, Oman, and the United Kingdom have all adopted the state-backed UPI.
In a nutshell, this new growth phase of UPI is expected to supercharge India’s digital payments landscape and position India as a global leader in the finance space.
The author is the Associate Director, Product Management, Ezetap by Razorpay. Views are personal.