- Economy
- India
The Unified Payments Interface (UPI), a real-time transaction platform that has become increasingly popular in India, could potentially compete with the global interbank network SWIFT.
ByCarole Dieterich
7 min read
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Satya Prakash Mishra runs a small store in the south of New Delhi on the side of a busy road. His shop sells single cigarettes, matches, and mint candies. Customers typically spend no more than 100 rupees, which is around €1. On this particular afternoon in November 2022, a bank employee on their break came in to buy a cigarette for 10 rupees. But instead of paying with coins or banknotes, he used his smartphone to scan the QR code displayed on the counter and make the transaction. The payment, a total of €0.12, was instantly transferred to Mr. Mishra's account.
Until three years ago, the 27-year-old shopkeeper swore by cash. Today, he is one of the 50 million Indian merchants who use the Unified Payments Interface (UPI).
Launched in 2016, UPI is India's real-time payment system that allows users to transfer money directly from one bank account to another: from a customer to a business, or between individuals. UPI now has 260 million users in the country of 1.4 billion people.
UPI is a digital public infrastructure created by the National Payments Corporation of India (NPCI). It connects more than 300 banks and enables seamless financial transactions through various mobile applications such as Google Pay, Amazon Pay, Paytm, and PhonePe.
"The government and public sector have laid the foundation for the instant payment system, using open-source technology, on which the private sector can now innovate and compete in the market," said Amitabh Kant, former chairman of NITI Aayog (the leading think tank serving the Indian government) and current G20 representative for India. Mr. Kant made this statement when India took over the rotating presidency of the G20 forum on December 1, 2022.
Fight against money laundering
In 2019, Google commended the unique "Indian model" of the UPI and suggested that the Federal Reserve adopt similar principles while creating its own instant payment system. "The company believes that a collaboration between banks, governments, and technology companies using open and standards-based platforms like UPI is the best way to promote and support digital payments," said Caesar Sengupta, former vice president and general manager of payments and the Next Billion Users Initiative at Google.
While cash is still king in India, the country has made a giant leap in digitizing its economy. In six years, UPI has become the preferred digital payment method for Indians, ahead of debit and credit cards. In the second quarter of 2022, 17.4 billion transactions were made with UPI, a 118% increase in volume over the same period last year, according to a report by Worldline, a French multinational online payment specialist. Over 2021, UPI had recorded about 39 billion transactions, worth $940 billion (€881 billion), about 31% of India's gross domestic product.
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