In just six years, UPI has become the most popular way Indians transact online. The mobile electronics payments system was used for over 6.57 billion transactions in the world’s second largest internet market last month. Now, it’s taking steps to supercharge its growth.
The payments network, which was built by a coalition of banks, is India's attempt to challenge card companies in an open market, bring hundreds of millions of people into the fold of digital payments and curb the proliferation of corruption.
"During the period between March 2020 and August 2022, UPI usage grew by 427%," said Shaktikanta Das, the governor of India’s central bank, at a conference Tuesday afternoon.
The central bank is working to expand UPI to "several nations in Asia and the Middle East and other parts of the world," and is setting up an international subsidiary, he said.
"UPI has emerged as the pride of the nation... It's one area where I think India can play a major leadership role in the world in the days to come. It's a phenomenal product, but we need to be extremely watchful of its infrastructure as it scales," he added.
On Tuesday, Das said two new offerings of UPI -- one expands its usercase while the other will helps it continue to scale -- have gone live.
He said a lighter version of the payments system, called UPI Lite, is now live in the country with eight banks including HDFC, SBI and Kotak. UPI Lite, which was first proposed earlier this year, processes payments below 200 Indian rupees ($2.5) and is aimed at lowering the burden on banks’ infrastructure, executives said at a conference Tuesday.
For all its fast-growth, UPI continues to face some challenges with its success rate. UPI Lite is designed to work in near-offline mode and appears to handle settlement slightly differently from its mature counterpart. “You will receive SMS once a day for UPI LITE Transactions from your Issuing Bank containing history of Transactions carried out during the day,” an FAQ explains.
UPI Lite creates a virtual, on-device wallet that can hold up to $25. About 50% UPI transactions carry a value of $2.5 or less. “UPI Lite will provide users with a convenient solution for faster and simpler low-value transactions,” said National Payments Corporation of India, a special unit of the central bank that oversees UPI.
The central bank is also moving ahead with its plan to link UPI to credit cards.
Das said Indian Bank will be the first to issue Rupay Credit Card that links to UPI. By adding support of UPI on top of credit cards, the central bank is attempting to further grow the application of the newer payments system, allowing “increased opportunity” to customers to use their credit cards and build credit rating, the executives said.
“This could potentially increase credit card penetration and expand the scope of digital payments in India, positively impacting both card companies (such as SBI Cards) and fintech platforms (such as Paytm),” analysts at Goldman Sachs wrote of the move.