Why in news?
An International Monetary Fund (IMF) report on fast payment systems in July 2025 ranked India first in adoption and innovation. The Unified Payments Interface (UPI) processed 18.39 billion transactions in June 2025, accounting for roughly half of all real‑time payments worldwide. The milestone highlighted India’s success in building an inclusive digital payments infrastructure.
Evolution of UPI
UPI was launched in 2016 by the National Payments Corporation of India as a platform to send money instantly between bank accounts via mobile phones. Built on the foundations of the Jan Dhan bank account programme, Aadhaar biometric ID and widespread mobile connectivity, UPI offered a simple interface that allowed users to pay using a virtual address rather than bank details.
Features driving adoption
- Ease of use: Users can transfer money 24×7 with a few taps. QR codes, contact lists and voice assistants simplify payments for people who are not comfortable with typing long numbers.
- Low cost: Transactions are free or nominally priced, encouraging even small payments. Government policies have capped merchant fees and promoted interoperability between banks and wallets.
- Security: Two‑factor authentication and transaction limits reduce fraud. Real‑time notifications alert users of suspicious activity.
- Innovation: UPI apps offer features such as bill payments, ticket booking, credit lines and cross‑border transfers. The system is open to banks and non‑bank players, spurring competition.
Challenges and recommended actions
- Digital divide: Millions still lack smartphones or reliable internet. Extending UPI Lite for feature phones and offline transactions can broaden access.
- Fraud and privacy: As usage grows, scams and data breaches pose risks. Strong consumer education, grievance redress mechanisms and data protection laws are essential.
- Cross‑border functionality: Partnerships with other countries allow diaspora and tourists to use UPI. Expanding these arrangements could boost remittances and tourism.
Significance
India’s leadership in real‑time payments demonstrates how public infrastructure and supportive regulation can spur innovation. UPI has brought millions into the formal economy, reduced reliance on cash and inspired similar systems in Asia and Africa. To sustain this momentum, policymakers must continuously upgrade technology, strengthen security and ensure that the benefits reach the last mile.