In less than a decade, India’s Unified Payments Interface (UPI) has transformed the way Indians transact, so dramatically, in fact, that it now leads the globe in real-time payment systems. With over 640 million daily transactions and a staggering 18.39 billion transactions in June 2025 alone, worth Rs 24 lakh crore, UPI has officially overtaken global payment giant Visa in volume, cementing its position as the world’s most used real-time payments infrastructure.
The International Monetary Fund (IMF) in its latest report, Growing Retail Digital Payments: The Value of Interoperability, revealed that UPI now accounts for 85 percent of India’s digital transactions and contributes to nearly 60 percent of all real-time digital transactions globally.
How did a homegrown digital payment system, backed by a non-profit public body, disrupt the world’s most powerful payment giants? Let’s unpack the story behind this fintech marvel.
What is UPI and how does it work?
Launched in August 2016, Unified Payments Interface (UPI) is a real-time payments system developed by the National Payments Corporation of India (NPCI). It is built on the existing Immediate Payment Service (IMPS) infrastructure but goes far beyond traditional bank transfers in its scope and ease of use.
UPI allows users to:
- Link multiple bank accounts through a single mobile app
- Make peer-to-peer (P2P) and peer-to-merchant (P2M) payments instantly
- Pay utility bills, make donations, scan QR codes, and set up auto-debits or recurring payments
- Transact 24×7, including on weekends and public holidays
Unlike conventional card-based systems that involve intermediaries and settlement delays, UPI enables instant, direct bank-to-bank transfers, with seamless interoperability across apps and banks.
Whether using Google Pay, PhonePe, Paytm, Amazon Pay, BHIM, or any other UPI-enabled platform, users can send and receive money across platforms, making it bank-neutral, app-neutral, and device-friendly.
The Genesis: Why was UPI introduced?
UPI’s foundation was laid amid India’s broader drive toward financial inclusion and digitisation. While NPCI had already introduced the IMPS system and RuPay cards, there was a pressing need for a scalable, unified, and user-friendly solution to replace fragmented digital payments.
The post-2014 Digital India campaign gave significant momentum to this vision. With over 400 million new bank accounts opened under the Pradhan Mantri Jan Dhan Yojana (PMJDY) and rising smartphone penetration, a massive untapped digital banking population had emerged.
UPI was conceptualised as the critical bridge to connect these accounts to an inclusive digital economy.
Former RBI Governor Dr. Raghuram Rajan, under whose tenure UPI was developed, had described it as a “revolution” in India’s financial infrastructure. In a 2016 address, he remarked, “India has built the most sophisticated public payment infrastructure in the world. It is universal, accessible, and empowering.”
Covid-19: The turning point
While UPI was already growing steadily, the Covid-19 pandemic catalysed its explosive adoption. With lockdowns, hygiene concerns, and the public’s aversion to handling cash, digital payments became not just convenient, but essential.
From 2020 to 2022, UPI’s transaction volume doubled, then tripled, ultimately crossing 6 billion monthly transactions by the end of 2022.
Several key factors accelerated this:
- No transaction fees for users or merchants (thanks to government’s no-MDR policy)
- Multilingual UPI apps helped bridge the rural-urban divide
- QR-code adoption surged, particularly among street vendors via government schemes like PM SVANidhi
- Merchant onboarding became easier than ever, with instant KYC and Aadhaar-linked account setups
By 2023, UPI had surpassed all other digital payment modes in India—including debit and credit cards—in both volume and value.
Breaking down the numbers (As of June 2025)
- Daily transactions: Over 640 million
- Monthly transactions: 39 billion
- Monthly value: ₹24 lakh crore
- YOY growth: 32% from June 2024
- User base: Over 500 million active users
- Share of India’s digital retail payments: 85 percent
UPI’s growth story is underpinned by NPCI’s open architecture and standardised APIs, which allowed private apps like PhonePe and Google Pay to innovate, while keeping the core system publicly governed and neutral.
Why UPI succeeded where global giants struggled
1. Interoperability and open access
The IMF’s report singles out interoperability as the most critical reason behind UPI’s rapid expansion. By ensuring that users could send and receive money across apps, banks, and devices, UPI broke the silos that had restricted previous payment systems. This allowed new entrants to join the ecosystem, offering better services, UI improvements, and added functionalities, without disrupting the overall integrity of the system.
2. Zero-cost transactions
UPI’s success also lies in its zero-cost structure. Since January 2020, the Indian government enforced a No MDR (Merchant Discount Rate) policy on UPI transactions. Merchants were not required to pay any fees for accepting payments, encouraging small vendors, shopkeepers, and businesses to adopt it without hesitation.
The Finance Ministry has consistently reiterated its commitment to keep UPI free, despite concerns raised by banks about its sustainability. Any speculation about charges being introduced has been officially denied as “baseless and misleading.”
3. Multilingual, inclusive design
UPI apps have made conscious efforts to support multiple Indian languages, enabling even first-time smartphone users in rural India to access digital payments. Coupled with:
- Low data consumption
- Simple onboarding (via Aadhaar, PAN, mobile number)
- Biometric authentication
- Voice and IVR-based options like UPI 123Pay (for feature phones)
- UPI has become truly pan-Indian, cutting across demographics and geographies.
4. Strong government and regulatory backing
Government-backed schemes such as PM SVANidhi, launched in June 2020, offered cashback rewards and credit incentives to street vendors who adopted UPI, bringing a massive chunk of India’s informal economy into the digital fold.
The Reserve Bank of India (RBI) also mandated UPI access for feature phones, introducing tools like IVR-based payments and missed call banking, further expanding reach.
UPI Goes Global: India’s payment tech export
What started as an Indian innovation is now being exported. UPI is now live in seven countries, with more in the pipeline: United Arab Emirates, Singapore, Bhutan, Nepal, Sri Lanka, France, Mauritius.
In France, Indian tourists and expats can now pay at select retail outlets directly through UPI without needing a local card or currency. Similarly, in Singapore, the UPI-PayNow link has enabled real-time, low-cost cross-border remittances.
The NPCI International Payments Ltd (NIPL) has been actively building partnerships with foreign banks and payment systems, like Mashreq Bank (UAE) and PayNow (Singapore), to expand UPI’s footprint.
Future of UPI: What’s Next?
1. BRICS Payment Integration
India is now advocating for UPI to be adopted as a standardised cross-border payment system within the expanded BRICS group, which now includes six new member countries. This move could:
- Reduce remittance costs
- Allow direct merchant settlement abroad
- Elevate India’s leadership in global fintech diplomacy
2. Enhanced Global Remittance Corridors
Tech firms like RS Software are working with NPCI to integrate UPI with 10 other countries, reducing settlement times and fees in key NRI corridors like UAE, Singapore, and the UK.
3. Infrastructure Overhaul
On June 16, 2025, NPCI upgraded UPI’s backend to improve response time from ~30 seconds to just 10–15 seconds. This has significantly increased system reliability, paving the way for:
- Higher daily limits
- Micro-lending via UPI
- Expanded merchant ecosystems
A fintech revolution rooted in inclusion
In just nine years, UPI has evolved from a novel experiment in digital banking to a global benchmark for real-time, inclusive, and scalable payments infrastructure. With over 85% of digital payments in India now running on UPI, it has not only reshaped commerce but also made financial inclusion a reality for half a billion people.
While countries across the world still struggle with fragmented systems, high transaction fees, and intermediary bottlenecks, India has demonstrated that open architecture, strong regulation, and inclusive design can fuel a payment revolution at unparalleled scale.
As UPI gears up for global adoption, its journey stands as a shining example of how public digital infrastructure, when thoughtfully built, can transform lives, economies, and even global standards.
