NEW ERA RISE OF A IN DIGITAL PAYMENTS
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RISE OF A NEW ERA IN DIGITAL PAYMENTS
2
I dream of a Digital India where the world
looks to India for the next Big Idea
Hon’ble Prime Minister Shri Narendra Modi
inaugurated the 'Digital India Week' at the
Indira Gandhi Indoor Stadium, New Delhi
1st July 2015
3 CONTENTS Ushering in a Digital India 04 Continued Innovation 07 Seamless Customer Experience 08 leads to Explosive Growth Benefits Accrue Across the 09 Payments Ecosystem UPI at the Forefront of Innovation 10 Benefits of UPI for Merchants 11 and Customers Customer Speaks 12 Benefits of UPI to the Banks & FinTech 14 Growth story of UPI 15 UPI Goes Global 17
4 Ushering in a Digital India
5
November 2010 November 2010 March 2012
December 2012 August 2014 August 2016
NCMC
December 2016 October 2017 March 2019
6
Introduction
• India’s digital payments system -has evolved pushing India towards becoming a cashless
rapidly over the last few years. This has economy.
been encouraged by various developments • Firstly, Promotion of digital payments has
in information and communication technol- been accorded highest priority by the Gov-
ogy and by forward looking Regulatory and ernment of India to bring each and every
Government policies. The trinity of near segment of our country under the formal
universal account penetration, increasing fold of digital payment services. The vi-
smartphones penetration and low cost pay- sion is to provide facility of seamless dig-
ments rails has led to a never-before boom ital payment to all citizens of India in a
in digital transactions. For instance, since convenient, easy, affordable, quick and
April 2016, UPI has become synonymous to secured manner.
a rapid digital payment which has seen an
• Secondly, Government is also working on
exponential growth trajectory to cross over
incentivizing digital transactions by provid-
200cr transactions a month. This is further
ing various tax and non-tax benefits to cus-
expected to grow 10x over the next 3 years.
tomers and merchants.
Digital India and Demonetization Drive
• Thirdly, Citizens have been provided multi-
• During the inauguration of the ple options to make digital transactions. A
‘DigiDhan Mela’ on 31stDecember 2016, dedicated ‘Digidhan Mission’ has been set
Honorable Prime Minister, Shri Narendra up for building strategies and approaches
Modi launched BHIM UPI App and urged in collaboration with all stakeholders to
people to make digital payments a habit promote digital payments and create
to transform the country into a cashless awareness.
economy.
• Some of the reforms undertaken in digital
• The Mela resulted in the ‘Digital India’ pro- payments are:-
gramme, which is a flagship programme of
Banking from anywhere, expanding the
the Government of India with a vision to
base of financial inclusion
transform the nation into a digitally em-
powered society and a knowledge econo- Subsidy to end beneficiary’s account
my. To achieve “Faceless, Paperless, Cash- Use of next-gen technologies
less” status is the goal of Digital India. Scaling-up the merchant acceptance
• The ambitious drive to shift from a cash- infrastructure
based to a digital economy saw a strong Incentive schemes for customers and
push in the form of demonetization in merchants
2016, which accelerated this transition by UPI referral and cashback schemes
2-3 years. Since then, the Government of Digital literacy and awareness
India has undertaken several initiatives for
7
Continued Innovation
Early Products Bharat Bill Payment System (BBPS) in
2017
• There has been a continuum of innovation
National Common Mobility Card (NCMC)
in the digital payments space since 1980’s.
– One Nation One Card in 2019
Some of the important milestones attained
in this overall process of development of the NPCI Driving Digital Adoption
payments system include the introduction • To consolidate the innovation in the pay-
of:- ments industry, the Government estab-
MICR clearing in the early 1980s lished the National Payments Corporation
Electronic Clearing Service (ECS) and Elec- of India (NPCI), a not-for-profit umbrella
tronic Funds Transfer (EFT) in the 1990s organization was founded in 2009 to man-
age India’s retail payment systems. NPCI has
Issuance of credit and debit cards by banks
sharply focussed on bringing innovations in
in the 1990s
retail payment systems through the use of
ATMs, Mobile and Internet Banking in
technology for achieving greater efficien-
early 2000s
cy in operations and widening the reach of
The National Financial Switch (NFS) in payment systems.
2003
• NPCI has now been recognized internation-
RTGS and NEFT in 2004
ally for it’s significant impact on retail pay-
The Cheque Truncation System (CTS) in ment systems in India. Many international
2008 organizations and government’s are in ac-
Next Generation Payment Platforms tive consultations with NPCI to translate
• The Government of India has played a pivot- the success of NPCI’s payments systems
al role in driving the adoption of digital pay- in their context. Moreover, the NPCI has
ments by taking a number of steps towards evolved into a strong collaborative platform,
creating a cashless society. Post 2014, this providing opportunities for not only banks,
drive has accelerated as can be witnessed in but also for FinTech players to participate in
the significant initiatives taken to develop in- real- time payments system.
novative next generation payment products • The Government’s ambitious drive to shift
and platforms including introduction of:- from a cash-based to a digital economy
National Unified USSD Platform saw a push in the form of demonetiza-
(NUUP*99#) in 2014 tion in 2016. Since then, the Government
National Electronic Toll Collection (NETC) of India has under taken several initia-
in 2016 tives for pushing India towards becoming a
Unified Payments Interface (UPI) and cashless economy.
BHIM App in 2016
8
Seamless Customer Experience
leads to Explosive Growth
Accelerating Growth required
• It is noteworthy that total digital transac- Interoperability – Customers can trans-
tions which were 1,004 crores in FY 2016- fer money on a real-time basis (available
17 have seen exponential growth post the 24×7) and across multiple bank accounts
launch of UPI. During FY 2017-18, 106% using any UPI App
growth was witnessed taking the tally to Affordable merchant acceptance infra-
2,071 crore transactions. structure both static UPI QR and dynam-
ic UPI QR at the merchant locations
• In FY 2018-19, UPI accounted for 17% of
the total 31 billion digital transactions in the Cost-effective way of making/accepting
country. The next fiscal year saw UPI’s share payments
rising to more than 27% as it processed 12.5 Enhanced security
billion transactions of the total 46 billion UPI is a completely open and interopera-
digital transactions. In FY 2020-21, UPI ble: Transaction can be initiated from any
accounted for 40% of the total 55 billion bank’s UPI app
digital transactions Works on Immediate Payment Service
To put these numbers in context, the value (IMPS) platform
of transactions on BHIM UPI amounted to Both payment and collection transactions
15% of India’s GDP in FY 2019-20. are possible
• With UPI, customers can make payments No need of pre-addition/approval of ben-
instantly via their mobile devices. It has eficiary
become a popular digital payment option • As a result, as of June 2021, UPI
owing to its unparalleled benefits superior has 21+ crore users who did 2.8
customer experience features like :- billion financial transactions in June,
Simple to use functionality: Requires totalling to a settlement value of
only Virtual Payment Address (VPA), `5.47 lakh crore.
i.e.: account no., IFSC code, etc. are not
9
Benefits Accrue Across the
Payments Ecosystem
• UPI’s rapid growth has once again demon- quire any brick and mortar branch visits
strated India’s ability to build a world-class • Low cost QR code based physical accept-
payments infrastructure from scratch. The ance aided by in–app, web and intent based
UPI system has created a national open payments
standard which has been adopted by more
• Fully compliant with international security
than 200 Indian banks.
standards and certifications
• The open systems has enabled global
• Payments are UPI ID based, providing high-
players like Google, WhatsApp, Walmart,
er security and confidentiality to theUsers
True Caller, Amazon, Uber to provide
UPI services. • Enables contactless payments across all chan-
nels like mobile, ATM, internet and Mobile
• Further, benefits of UPI accrue across the
Banking
payments ecosystem:-
• In short, UPI’s large number of benefits
• Person to Person (P2P) and Person to Mer-
has truly transformed the country from a
chant (P2M) payments give customers 100%
cash-dependent economy to a nation known
coverage of payment transactions
for its digital payments landscape.
• Truly interoperable payment system running
round the clock with participation from both
banks and non-bank entities
• UPI also allows for multiple methods for in-
tegrating merchants - QR based payments
being the most popular. In just 5 years, over
100 million UPI QRs have been deployed
in the market for accepting merchant pay-
ments, from only 2.5 million devices that
were accepting merchant payments prior
to this.
• Support for all sources of funds viz. Bank Ac-
count, Pre-paid Wallets, Overdraft Account
etc.
• Fully digital on-boarding which does not re-
10
UPI at the Forefront of Innovation
Enhancing Trust for Customers and small businesses collect payments from
Businesses their customers, which used to be manual,
mostly cash-based. Using UPI, merchants
• The benefits of UPI was observed in full
can now remind customers to pay and even
glory during the COVID-19 pandemic when
set up specific dates for the customer to pay
UPI served as critical lifeline especially for
by, simplifying the collection process.
small and micro merchants. In FY 2020-21,
UPI processed over 9 billion contactless Tapping Use Cases
merchant transactions with total value • UPI has also helped Banks to reduce cash
over `6 lakh crores. requirements on channels like ATMs
• UPI has made buying and selling through and Branches resulting in reduction in
fintech app solutions, easier for both e-com- operational costs and improving custom-
merce providers as well as consumers. This er experience. It can also anchor a broader
has created a huge demand in the FinTech suite of fintech applications like micro-pen-
industry. There is no lag which helps in the sions, digital insurance products, and flexible
smooth flow of business. loans. These are custom solutions created by
Indian technology companies, on the public
• Moreover, UPI has opened a host of oppor-
infrastructure of UPI.
tunities for start-ups and e-Commerce play-
ers to come up with innovative solutions that • Tech companies are increasingly leveraging
elevate the customer experience. the power of UPI to expand the digital eco-
system and this has led to a great accelera-
• UPI also changed the way merchants and
tion in the pace of financial inclusion.11
Benefits of UPI for Merchants
and Customers
For Merchants:- For Customers:-
• Secure and convenient way to • Round-the-clock availability
receive payment directly in bank • No sharing of sensitive data
account.
• Simple user interface including ease of raising
• Low cost infrastructure for receiv- complaints
ing payment – QR Code
• Convenience and affordability (no cost/ very low
• No need to handle cash cost)
• Zero MDR • Availability of apps with simpler interfaces
• No risk of storing sensitive data • Suitable for payments without exposing account
• Collect functionality details
• Suitable for both online and offline • Convenient for high frequency low value merchant
merchants payments
• Integration into real-time pay- • Multiple options (Apps) available for to the
ments customer. Customers can choose from BHIM,
• Access to large database of cus- individual bank as well as non-bank Apps
tomers using UPI payment mode • Financial inclusion due to low cost and ease of
• No need of storing customers operation
bank or financial details • Creates Digital financial footprint for users which
enables access to credit and other financial services12
Customer
Speaks13 Customer Speaks
14
Benefits of UPI to the Banks &
FinTech
For Banks:- For Payment Service Providers & FinTech:-
• Low cost alternative to cash • Open architecture fosters innovation and
transactions development of unique products
• Low merchant onboarding cost • Promotes partnerships with banks & FIs for
• Data on transactions enables development of customer centric solutions
targeting customers for other • Opportunity to target UPI customers for
financial services credit and other financial services
“
The UPI Platform has been build on a
open source stack which is one of the most
advanced open source stacks which means
that UPI is capable of scaling up to billions of
“
With many customers opting for contactless payments, UPI
has become their preferred mode in the digital payments
innovation in the country giving customers a truly world-class
transaction at very low cost. experience.
Shri Nandan Nilekani, Co-Founder, and Non- Mr. Harshil Mathur, Razorpay
Executive Chairman, Infosys
“
Ever since UPI launched is 2016, we have
wintnessed UPI’s rapid adoption amongst
the public. The success story of UPI has been
acknowledged across the world with other
“
UPI AUTOPAY gives customers and business the
complete control of their payments. The feature helps
businesses automate billing, improve cash flows, and offers
better pricing.
countries trying to emulate siiler solutions.
Shri Rajnish Kumar (Formar Chairman, State Mr. Sudhir Sehgal - PayU
Bank of India
“
UPI is a big step forward in customer convenience which
offers significant customer of registering recurring
payments one time without the fear of forgeting monthly
payments.
Mr. Parag Rao, HDFC Bank15
Growth of UPI Ecosystem
Number of Banks in UPI Number of Unique Customers in UPI (Cr)
25
250 224 21
216 20
20
200
142 148 15
14
150
91 10 8
100
44 5 3
50
0
0 0
Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Jun-21 Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Jun-21
UPI - Merchant Payments
10,000 6,00,000
UPI Apps
9,291
5,00,000
8,000 6,22,061 cr
16 Fintech
4,00,000 20 Fintech
6,000 Apps
4,458
Apps
3,00,000
4,000
2,17,479 2,00,000
80+ total UPI Apps
2,000 1,131 1,00,000
2 104 49,512
- 79 4,130 -
FY 16-17 FY 17-18 FY 18-19 FY 19-20 FY 20-21
Vol (mn) Val (cr)16
Growth in UPI transactions
UPI has gained significant traction in the domestic market, and also recognition in
international markets in a short span of time.
F.Y-2016-17 F.Y-2017-18 F.Y-2018-19 F.Y-2019-20 F.Y-2020-21
Volume Value Volume Value Volume Value Volume Value Volume Value
Platform (in Lakh) ( Cr) (in Lakh) ( Cr) (in Lakh) ( Cr) (in Lakh) ( Cr) (in Lakh) ( Cr)
UPI 179 6,947 9,152 1,09,832 53,534 8,76,970 1,25,186 21,31,730 2,23,307 41,03,653
CONTRIBUTION OF UPI TRANSACTIONS IN TOTAL DIGITAL TRANSACTION
(IN CR)
6000 90%
5554
80%
5000
4572 70%
4000 60%
3134 50%
3000
40% 40%
2070
2000 30%
27%
20%
1000 17% 2233
1251 10%
4%
92 535
0 0%
17-18 18-19 19-20 20-21 (Provisional)
Total Fin. Txn. Vol UPI Fin. Txn Vol % UPI Share17
UPI Goes Global
• Reserve Bank of India (RBI), in close collab- • For instance, UPI is now live in Singapore and
oration with the Government and National in the UAE, work is under progress. NPCI is in
Payments Corporation of India (NPCI), is discussions with more than 30 countries for
working to expand the reach of Unified Pay- enabling acceptance of remittances through
ments Interface (UPI) globally. In this con- the adoption of UPI.
nection, RBI has approached other central • Further, many other institutions across dif-
banks highlighting the features of UPI as an ferent countries have reportedly been ex-
efficient and secure system. ploring setting up UPI like platforms.
• To streamline the foray of UPI into inter- • At global forums like the World Bank and
national markets, National Payments Cor- Bank for International Settlements (BIS),
poration of India (NPCI) has launched its there have been discussions around the
dedicated international subsidiary ‘NPCI need and importance of domestic real-time
International’. low-cost payment systems and also on the
• NPCI has achieved the pinnacle of success at possibility of connecting payment systems
developing an exemplary robust payments of different countries to facilitate real-time,
system that is cost effective, secure, conven- low cost cross border remittances.
ient and instantaneous. Several nations have • UPI has immense potential to provide the
displayed an inclination towards establishing basis for a stronger bilateral business and
a ‘real time payment system’ or ‘domestic economic partnership with other jurisdic-
card scheme’ inspired by the exemplary in- tions, and helps buttress India’s soft power.
novations by NPCI in the country.
“
With UPI, India has created something
‘truly special’ and is opening up a world of
opportunities for micro and small businesses
that are the backbone of the Indian economy.
“
UPI was thoughtfully planned and critical aspects of its
design led to its success. It is an open system on which
technology companies can build apps that help users
to directly manage transfers into and out of their bank
accounts.
Mark Zuckerberg, CEO-Facebook
Sundar Pichai, CEO-Alphabet
“India has built an ambitious platform for digital
payments, including a system for sending
rupees between any bank or smartphone app.
“
India’s Unified Payments Interface allows both domestic
and global players to develop mobile payment applications.
As such, it lowers the barriers to entry, especially for smaller
firms, thus levelling the playing field.
Bill Gates, Co-Founder-Microsoft Agustin Carstens, GM-BIS
“
Google has been a successful market participant in India’s use of UPI,
and Google Pay provides one of the three leading mobile applications
that use UPI, as measured by transaction volume. Google wants the
US government to follow a similar model of open-payments to build
FedNow, a new interbank real-time gross settlement service (RTGS) for
faster digital payments in the country.
Mark Isakowitz, VP-Google11
18
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