The Last Eight-Year Journey of UPI’s Meteoric Rise : Redefining India’s Digital Payment Revolution

In 2016, the National Payments Corporation of India developed the Unified Payments Interface (UPI), an Indian instant payment system and protocol. This mobile application-based interface facilitates various facilities, such as inter-bank peer-to-peer (P2P) and person-to-merchant (P2M) transactions. This interface empowers mobile devices to transfer funds between two bank accounts instantly through mobile number-linked UPI IDs, given the mobile number must be registered with the bank. This system is governed by the Reserve Bank of India (RBI) and operates as an open-source application programming interface (API) on top of the Immediate Payment Service (IMPS). On August 25, 2016, Indian Banks began releasing their UPI-enabled apps on Google Play. The growth trajectory of UPI shows three distinct phases: initial adoption phase (2016-2018) with modest growth, acceleration phase (2018-2021) marked by rapid expansion and pandemic-driven adoption, and maturation phase (2021-2024) showing sustained but more stable growth rates. Despite this maturation, absolute growth numbers remain impressive, suggesting continued market expansion potential.

The Unified Payments Interface (UPI) has grown remarkably since its launch, transforming India’s digital payment landscape. Starting from virtually zero transactions in March 2016, UPI has achieved an extraordinary milestone of 13,440 million transactions worth ₹19,78,353.23 crores in March 2024, showcasing its phenomenal adoption rate and scalability. The initial adoption phase (2016-2017) was modest, with monthly transactions under 10 million and values below ₹3,000 crores. However, the system gained significant momentum from 2018 onwards. A crucial turning point came in FY 2018-19, when monthly transaction volumes crossed the 500 million mark and values surpassed ₹1 lakh crores for the first time.

The COVID-19 pandemic acted as a catalyst for UPI adoption. During the lockdown period in April 2020, despite an initial dip to 999.57 million transactions, UPI quickly rebounded and showed accelerated growth. This period can be marked as a major shift in consumer behaviour towards digital payments, with UPI emerging as the preferred contactless payment method. Furthermore, the Bank’s participation has emerged as a key growth driver behind UPI’s rapid expansion. The network expanded from just 21 banks in early 2016 to 572 banks by March 2024, representing a massive increase in the payment system’s reach and accessibility. This expansion has been crucial in creating a robust digital payment infrastructure across both urban and rural areas.

Looking at transaction efficiency, Interestingly, while both transaction volumes and values have grown substantially, the average value per transaction has decreased over the years, from around 3,000-4,000 rupees in the early days to about 1,500 rupees in recent months. Despite a substantial increase in transaction volumes and values, the decline in the average value per transaction strongly indicates that UPI (Unified Payments Interface) has become deeply integrated into everyday life.

This steady growth in both volume and value, along with the continuous rise in participating banks, has established UPI as the underpinning of India’s digital payment ecosystem. The system has transformed peer-to-peer transactions, merchant payments, bill payments, and other financial services, and it has become an essential part of India’s journey toward a less-cash economy. Initially, UPI was used primarily for larger payments, but as it gained trust and accessibility, it became the preferred method for smaller, routine transactions. This transition suggests that UPI has effectively achieved its purpose of assimilating even the most minor financial activities into a digital construct. The current trend of lower-value transactions points to its widespread adoption across diverse sectors and user demographics, including small merchants and individual consumers, who now rely on UPI for daily purchases. This ubiquity reflects how UPI has democratized digital payments, making it a cornerstone of financial inclusion in India.

The story of UPI, from its inception in 2016 and now hailed as the flagship of Indian digital payment systems, is much more than the mere emergence of a technology or a technology stack. The system’s success lies not just in its numbers but also in its ability to serve diverse user segments—from street vendors to large merchants, from rural consumers to urban professionals. Looking forward, it is clear that UPI is on a steep growth trajectory, and because of how easy it has become to use, there is still a lot of room for improvement—this is only the start. Given the constant evolution of UPI, with innovations like UPI-lite, credit on UPI, and global introductions through UPI’s partnerships worldwide, the system is set to scale newer heights. The story of UPI is a model of how technological innovation, when coupled with inclusive design and strong institutional backing, can produce a transformative effect at a national level, turning India into a global leader in the realm of digital payments and financial technology. With UPI now constantly innovating to cater to the evolving needs of consumers, it is much more than just a payment system; it has become a stalwart of India’s digital economy and journey towards financial inclusion.

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About Author

Pankaj Chowdhury is a former Research Assistant at the International Economic Association. He holds a Master’s degree in Demography & Biostatistics from the International Institute for Population Sciences and a Bachelor’s degree in Statistics from Visva-Bharati University. His primary research interests focus on exploring new dimensions of in computational social science and digital demography.

Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the views of 360 Analytika.

Acknowledgement: The author extends his gratitude to the National Payments Corporation of India for providing data support.

This article is posted by Sahil Shekh, Editor-in-Chief at 360 Analytika.