UPI’s success at home-
In May 2022, the Unified Payments Interface (UPI) mechanism broke all records for the most transactions in a single month. According to a survey performed by the National Payments Corporation of India (NPCI), respondents over the age of 60 favoured cards, UPI, and mobile wallets over the younger and middle-aged population’s favourites.
Layoffs, financing shortages, economic stagnation, and an imminent global recession have dominated May 2022. But, t he UPI ecosystem in India is one section that has been largely untouched (at least in terms of numbers). UPI recorded 595 Cr transactions worth INR 10.4 Lakh Cr in May 2022 alone. From April 2022, when it registered 558 Cr transactions, it increased by about 6% month over month. The platform has already surpassed about 80% of the transaction volume of 2021 in the first five months of 2022. NPCI International first entered the UAE in April after working with Mashreq Bank’s payment business, NeoPay.
The transaction volume increased by 6.6 percent from INR 9.8 lakh crores to INR 10.4 lakh crores ($134.3 billion). While global economic growth has slowed to single digits in recent months, UPI has already surpassed over 80% of the transaction volume of 2021 in the first five months of 2022. The transaction volume of payments made using UPI has increased by 122 percent since May 2021, when it was only INR 4.7 lakh crore.
In India, UPI is the most widely used digital payment method. It is linked to 323 banks. While the figures for May 2022 are yet to be released. The State Bank of India led the segment in April 2022, processing about 154 Cr transactions. HDFC Bank came in second with 49.7 crore transactions, followed by Bank Of Baroda with 36 crore, Union Bank with 34.6 crore, ICICI Bank with 32.5 crore, and Paytm Payments Bank with 31.6 crore. The online payment business has been ruled by UPI apps such as strong>PhonePe, Google Pay, Paytm, and now even WhatsApp Pay. UPI is looking to expand abroad as well as in India. The RBI has stated that the NPCI will endeavour to develop the digital payment service as a route for making cross-border remittances, despite the fact that it has previously partnered with various institutions in Nepal, the UAE, Japan, and China.
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You might be amazed to know that a total of 118.3 billion real-time payment transactions were processed worldwide. India processed 2.7 times as many instant payment transactions as China (18 billion in 2021) and 6.5 times as much as the United States, Canada, the United Kingdom, France, and Germany combined (7.5 billion).
Now reaching Europe-
The National Payments Corporation of India’s (NPCI) foreign branch, NPCI International, has inked a memorandum of understanding (MoU) with Lyra Network of France for the adoption of UPI and RuPay Cards in the country, giving the digital payment ecosystem a boost.
Lyra Network is a social media platform that connects people.
While NPCI was established in 2018, NPCI International was established as a wholly-owned subsidiary of NPCI in 2020. RuPay and UPI are being deployed outside of India by the international arm. The Reserve Bank of India has gave its approval for credit cards to be linked to the UPI. The service will only be available on RuPay cards for the time being, according to the statement. Only debit cards have been linked to the payment system thus far.
The MoU inked by NPCI International and Lyra Network of France, according to the Union minister, will benefit not only UPI but also RuPay Cards. In India, the National Payments Corporation of India (NPCI) is in charge of retail payment and settlement systems. RuPay Cards, UPI, and BHIM are just a few of the well-known payment instruments controlled by NPCI.
With the new UPI payment system in place, Indian travellers visiting France can now make seamless payments while on the road. The RBI stated in its annual report released last month that it is exploring the use of UPI for cross-jurisdictional transfers. To improve cross-border payment arrangements, RBI has looked into tying UPI with similar systems in other jurisdictions, particularly in G20 countries.
Given India’s monthly UPI transaction volume of 5.5 billion, this alliance will be a game-changer in the digital payments industry. NPCI previously signed a similar agreement with PayNow, a Singapore-based company. In March of this year, Nepal introduced the payment system for digital transactions. Bhutan, Singapore, Nepal, and the United Arab Emirates are among the countries that accept UPI payments. UPI services are also being discussed by NPCI International in the United States, West Asia, and other European nations.
In its annual report for FY22, RBI stated that, similar to Singapore’s PayNow and UPI, NPCI will look to cooperate with other international systems to facilitate instant fund transfers (remittances) without the need to sign up for the other system.
How India’s UPI Far Advanced Than Similar Systems In Use In Developed Nations-
UPI is a centralized facility that does not rely on individual banks. “The majority of real-time payment systems rely on similar underlying technologies to operate, but how the technology is aligned, coordinated, and deployed varies a lot. In India, the government has sponsored a model that has standardised and consolidated every part of the system, with financial institutions aligned and committed.
Another feature that has contributed to its widespread adoption and success is its simplicity. The idea was to design a secure, quick payment app that would make it easier for the general public to adopt digital payments at a lower cost and with less trouble.
However, the underlying infrastructure, the Immediate Payment Service (IMPS), is the most important factor. The UPI payment system in India is constructed on top of IMPS, and all transactions are processed through the IMPS system alone in the backend. In contrast to an IMPS user who requires information such as the receiver’s bank account and IFSC code, a UPI user only need the UPI ID.
In comparison to even the financial world’s hub, America, India’s payment system is far superior and more democratic. According to a recent assessment by ACI Worldwide Payments, India’s UPI system is significantly more advanced than that of many wealthy countries.
Despite the fact that the United States has multiple privately held real-time payment wallets, such as PayPal, due to their federal character, there was no centralised system in place. FedNow, the US Federal Reserve’s fast payment option, is only anticipated to begin pilot testing in 2022.
The United States has nearly 4,000 banks, and most states have their own banking payment laws in addition to the Federal Reserve’s restrictions. In India, the number of banks is far lower, and the RBI is in charge of all banking
Europe, on the other hand, is predominantly a cash economy. According to a European Central Bank report titled “Study on the Payment Attitudes of Consumers in the Euro Area,” cash still accounts for 73% of all transactions in the EU.
China is the only other country that can compare to India. It remains the second-largest real-time payments transaction volume country, but due to the dominance of private digital wallet giants WePay and AliPay, its real-time development has been hampered.
UPI Contribution in Indian Economy
In 2021, India’s quick payments saved $12.6 billion in additional payment costs. This cost-cutting enabled India to unlock $16.4 billion in economic output, or 0.56 percent of the country’s GDP. India’s rapid payment solutions are expected to generate an additional $45.6 billion in economic output by 2026, or around 1.12% of the country’s GDP.
Real-time payments and economic growth have a direct relationship. Real-time payments increase overall market efficiencies in the economy by allowing money to be transferred between parties in seconds rather than days. This helps firms and households with cash flow concerns by freeing up funds for investment or purchases!