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. The interface facilitates various facilities, such as inter-bank peer-to-peer (P2P) and person-to-merchant (P2M) transactions. It is used on mobile devices to transfer funds between two bank accounts instantly. The device’s mobile number must be registered with the bank. The recipient’s UPI ID can be used to transfer money. It 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 shows three distinct phases: initial adoption (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, indicating growing consumer confidence and merchant acceptance.

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.

Bank participation has been a key growth driver. 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 is a strong indicator that UPI (Unified Payments Interface) has become deeply integrated into everyday life.

The consistent upward trend in both volume and value metrics, coupled with the steady increase in participating banks, indicates that UPI has successfully established itself as the backbone of India’s digital payment ecosystem. The system has not only transformed peer-to-peer transactions but has also revolutionized merchant payments, bill payments, and other financial services, making it an integral part of India’s journey towards 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 shift suggests that UPI has successfully fulfilled its mission of digitizing even the most minor financial interactions. 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 journey of UPI from its humble beginnings in 2016 to its current status as India’s flagship digital payment system represents more than just technological advancement—it is a testament to financial innovation and digital inclusion. The system’s success lies not just in its numbers but in its ability to serve diverse user segments—from street vendors to large merchants, from rural consumers to urban professionals. As we look ahead, UPI’s robust growth trajectory and increasing adoption suggest that this is just the beginning. With ongoing innovations like UPI-lite, credit on UPI, and international expansions through UPI’s global partnerships, the system is poised to scale new heights. The UPI story exemplifies how technological innovation, when paired with inclusive design and strong institutional support, can create a transformative impact at a national scale, making India a global leader in digital payments and financial technology. As UPI continues to evolve and adapt to changing consumer needs, it remains not just a payment system but a cornerstone of India’s digital economy and financial inclusion journey.

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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.