Opinion | How the Modi Administration Is Going to Strengthen UPI and Unleash Its Worldwide Potential

In 2024, the UPI experience will undergo a significant transformation as the government is preparing several new initiatives aimed at enhancing transaction convenience. According to statistics issued by the National Payments Corporation of India (NPCI), UPI’s transaction volume in 2023 exceeded 100 billion, or around 118 billion, marking a major milestone. This is an astounding sixty percent increase from the seventy-four billion UPI transactions that were documented in 2022.

Over the years, the Unified Payments Interface (UPI) platform has had tremendous success, smashing all previous records that India is aware of. In retrospect, one of Prime Minister Narendra Modi’s most calculated and significant initiatives of his administration has been the drive towards cashless transactions, which has completely transformed India’s financial system. A rising client base and a revolution in Indian commerce have been made possible by a set of policies that prioritized digital infrastructure, financial inclusion, and internet connection. The government’s current goals are to protect user experience and maximize UPI’s potential globally.

Enhancing the UPI encounter
The Reserve Bank of India (RBI) and the National Payments Corporation of India (NPCI) have developed new regulations to make UPI increasingly safer and more convenient in response to the extraordinary public adoption of the system. This will facilitate the expansion of the UPI user base. Many of these new UPI payment regulations went into force on January 1.

These include deactivating inactive IDs, raising the transaction limit in hospitals and educational institutions from Rs. 1 lakh to Rs. 5 lakh, decreasing financial fraud by providing a four-hour window for reversing transactions with a new user, and eliminating the need for debit cards with UPI ATMs, which enable cash withdrawals through UPI apps.

Prioritizing the fight against financial fraud is the most recent UPI improvement. The goal of deactivating inactive IDs is to stop unauthorized usage and the accumulation of inactive user accounts. In an explanation, the NPCI said that the move was made “to prevent the inadvertent transfer of money to unintended recipients in case customers change their mobile number without disassociating their old number from the banking system.”

Another encouraging move to protect UPI users from financial fraud is the RBI’s recommendation for the establishment of a four-hour window that would let transactions to be reversed for four hours starting at the point when they exceed Rs 2000.

The raised transaction limit from Rs 1 lakh to Rs 5 lakh in industries like hospitals and educational institutions would further simplify life and satisfy the rising desire of UPI users. RBI Governor Shaktikanta Das announced a rise in the transaction limit at the bimonthly Monetary Policy Committee (MPC) meeting with the goal of encouraging more people to use UPI for online payments. Additionally, UPI Lite wallets now have a transaction cap of Rs 500 instead of Rs 200. Even those without an internet connection may access these transactions. However, the maximum amount that may be sent online is still limited to Rs 2,000.

Additionally, Indians’ relationship with UPI will be strengthened by the nation’s already started implementation and proliferation of UPI ATMs. Through a partnership between NPCI and Hitachi Payment Services, cash withdrawals via QR code scanning are now possible. Customers won’t need to carry debit cards in order to withdraw cash from other accounts thanks to this. By meeting their need for cash with a daily withdrawal cap of Rs 10,000, this would lure in even more consumers.

The rapidly evolving digital payments ecosystem in India is being accommodated by these new regulations, which also guarantee smooth and strong development with uncontaminated and secure fintech infrastructure.

ACCESSING THE WORLDWIDE POTENTIAL OF UPI
Group of 20 (G20) delegates were given a sneak peek of one of India’s most popular technologies when they arrived in New Delhi: the Unified Payments Interface. Travelers could fill a digital wallet with a single payment in their home currency, which they could use to deal with retailers in rupees using the widely used UPI QR codes, for the duration of their visit. This is just one of the many ways that UPI has increased its reach throughout the world in recent years; the system is now accessible in some form in more than 20 nations.

India’s ascent to the top of the digital payment charts—beyond even China and the US—is being propelled by UPI, the country’s widely used digital payment network. Consequently, it should not be shocking that UPI is gaining popularity around the world, as seen by the $1.7 trillion in transactions it handled in the fiscal year 2022–2023.

With the UAE, France, Singapore, Bhutan, Nepal, and Sri Lanka opening up to the payment system and permitting its usage in various forms, the UPI revolution has gained supporters on a worldwide scale. Talks and collaborations are underway to expand UPI into a number of additional countries, including Oman, Saudi Arabia, Australia, and the UK. UPI’s future looks bright and has the potential to revolutionize digital payments everywhere.

In addition, PM Modi made a plea for UPI’s admission into the BRICS alliance, which has since added six more members. “Everything from big box stores to street merchants uses UPI. At the BRICS meeting in South Africa last year, he had said, “India has the most digital transactions of any country in the world today.”

For Indian travelers who are used to UPI’s simplicity and often encounter issues while attempting to make payments overseas, the company’s growing worldwide presence is very welcome news. Additionally, it makes higher remittances possible. With $125 billion in remittances in 2023, India surpassed China and Mexico, who were ranked second and third, respectively, to become one of the world’s top beneficiaries of remittances. Since 2020, India has pursued an internationalization plan for UPI. The goal of this is to reduce the costs related to international transactions.

INDIAN FINTECH’S RISE
The expanding worldwide reach of UPI indicates promising opportunities for the financial industry in India. Even though financing for fintech startups decreased across all industries in 2023, India placed third internationally. Fintech companies in India received capital of only $2 billion in 2023, but by 2022, they had raised a sizeable sum of $5.2 billion, and by 2030, it is expected to grow to be a $2 trillion industry.

UPI capability has been made available to third-party applications, including popular finance platforms like Google Pay, Paytm, and PhonePe, owned by Walmart. For instance, by connecting a bank account that supports UPI and completing the required verification steps, users of Google Pay may start making transactions in a matter of minutes. Their extensive client acquisition strategies made sure that the technology was widely used. At the moment, PhonePe and Google account for around 80% of the market share. By December 31, 2024, the government hopes to restrict the market share of large IT companies to 30% while also diversifying the proportions of UPI services. The implementation of this regulatory action is expected to augment prospects for the fintech industry in India.

The smooth UPI interface, along with its meteoric ascent and anticipated profits, illustrates India’s progress toward digital and financial inclusion and presents a plethora of potential for the country’s economy. With just a single tap on a smartphone, UPI removes both physical and technological trade barriers, boosting consumer spending and accelerating economic development. India is clearly at the forefront of finance and digitization, as seen by its groundbreaking, cutting-edge payment system, UPI. The future of India’s economy, which is expected to expand to enormous proportions and acquire an internationally utilized payment network that was developed domestically, is embodied by UPI.