By TN Ashok
Unified Payments Interface – UPI – was introduced by the PM Modi government in 2016 in its pursuit to turn the cash economy into a digital economy and it has become so popular with the Gen Z and Millennials, we can say the technology has leapfrogged in a decade giving a fright to foreign players.
But the entire credit should not go to the Modi government because years earlier under the previous UPA government, the RBI and the Indian banking system had invented the architecture for a limited interoperability between banks. Indeed, PM Modi launched it in 2016.
There are moments when a government initiative stops being a policy programme and becomes part of everyday life. India’s Unified Payments Interface, or UPI, is one of them.
A decade ago, paying a shopkeeper, transferring money to a relative or buying something online usually meant cash, a bank transfer, a card or a wallet. Today, a QR code and a four-digit PIN can move money from one bank account to another in seconds.
The scale is extraordinary. In August 2026, UPI processed 24.51 billion transactions worth ₹29.82 lakh crore, according to the National Payments Corporation of India (NPCI). There were 752 banks live on UPI that month.
What began as an experiment in making Indian retail payments cheaper and interoperable has become one of the world’s largest real-time payment systems — and potentially one of India’s most important pieces of digital infrastructure.
Born under Modi but not invented overnight; It is tempting to describe UPI simply as a Narendra Modi government’s creation. The political credit belongs substantially to the Modi government because UPI was launched in April 2016, when Modi was Prime Minister. But the institutional story goes further back.
The National Payments Corporation of India (NPCI) was established in 2009 under the guidance of the Reserve Bank of India and the Indian banking system to build interoperable retail-payment infrastructure. The RBI had already identified the need for a modern, safe, accessible, and interoperable payments architecture.
UPI was the culmination of that work.
The pilot was launched on 11 April 2016, under the regulatory supervision of the RBI, with 21 member banks participating.
So, the fairest description is that UPI was conceived through the RBI-NPCI institutional architecture and launched under the Modi government. It was not created from scratch by one government.
Its genius was not merely that it allowed electronic payments. India already had cards, NEFT and IMPS. The breakthrough was interoperability.
A customer with an account at SBI could pay a merchant whose account was with HDFC. A person using PhonePe could pay somebody using Google Pay. A QR code could be scanned by users of different banks and applications. The payment rail was separated from the front-end application. That was a profoundly important decision.
India chose an open railway rather than another private highway; This is where UPI differs fundamentally from Visa and Mastercard. Visa is a global card payment network. It does not normally hold the customer’s bank account and move money directly between two Indian bank accounts in the manner UPI does. It provides the network and infrastructure through which card transactions are authorized and settled, with banks and other intermediaries charging merchants.
The merchant therefore operates inside a chain involving issuing banks, acquiring banks, payment processors, and card networks. The economics can be considerably more expensive.
Visa itself says merchants generally negotiate a merchant discount with their financial institution, calculated as a percentage of each transaction. Industry estimates put conventional card MDR broadly around 1%-3%, depending on the card, merchant, and transaction.
Cross-border payments can become still more expensive because foreign-exchange conversion, international processing and other charges enter the equation.
UPI took almost the opposite route. For ordinary bank-account UPI transactions, India effectively created a zero-MDR model. Consumers do not pay to send money, and merchants generally do not pay to receive ordinary bank-account UPI payments. The government has subsidized the ecosystem to compensate banks and payment companies for providing the infrastructure. That was the secret weapon.
Make digital payment cheaper than cash and easier than a card.
From 3.7 million transactions to 24.5 billion; The growth curve tells the story better than any political speech. UPI’s first full year was tiny by today’s standards. The system recorded only about 2.65 million transactions in 2016. By 2017, the figure had risen to about 419 million. In 2018 it was 3.75 billion and in 2019 about 10.79 billion.
Then came the smartphone-and-QR revolution.
| Year | UPI transactions | Approx. growth from previous year |
| 2016 | 2.65 million | — |
| 2017 | 419 million | ~15,700% |
| 2018 | 3.75 billion | ~794% |
| 2019 | 10.79 billion | ~188% |
| 2020 | 18.88 billion | ~75% |
| 2021 | 38.74 billion | ~105% |
| 2022 | 74.04 billion | ~91% |
| 2023 | 117.68 billion | ~59% |
| 2024 | 140.00 billion | ~19% |
| 2025 | 208.81 billion | ~49% |
| FY2025-26 | >241 billion | — |
| Aug. 2026 alone | 24.51 billion | ~22% y/y |
The numbers demonstrate two things. First, UPI has grown almost beyond comprehension. Second, growth rates are now naturally moderating because the base has become enormous.
The government says UPI’s transaction volume increased almost 12,000-fold in its first decade, while FY2025-26 transaction value exceeded ₹314 lakh crore.
In August 2025, UPI crossed 20 billion transactions in a single month for the first time. One year later it was above 24.5 billion.
The banking system has become one giant payment network; The other extraordinary feature is its breadth. NPCI currently lists more than 700 banks and payment entities live on UPI. Its August 2026 statistics show 752 banks live on the system. The underlying banking universe is diverse. India has 12 public-sector banks and 21 private-sector banks, alongside foreign banks, small-finance banks, payments banks, regional rural banks and thousands of cooperative banks.
That means UPI is not a government-bank payment system. SBI and Bank of Baroda coexist on the same rail as HDFC Bank, ICICI Bank, Axis Bank, Kotak Mahindra and dozens of other institutions.
Indeed, SBI remains the largest UPI remitter bank by transaction volume, followed by HDFC, Bank of Baroda, Union Bank and Punjab National Bank in NPCI’s August 2025 data.
The remarkable thing is that competition takes place above the rail rather than between incompatible rails.
PhonePe and Google Pay: the new giants; UPI itself is not an app. That distinction is often missed. UPI is the underlying payment infrastructure. Consumers interact with it through applications such as PhonePe, Google Pay, Paytm, BHIM, Amazon Pay, CRED, WhatsApp Pay and banking apps.
The market has nevertheless become highly concentrated. By mid-2026, PhonePe accounted for roughly 46% of UPI transaction volume, Google Pay about 33%, and Paytm around 8%. The remaining market was divided among a growing number of smaller applications.
This creates an interesting paradox. India has an extraordinarily open payment infrastructure, but the consumer-facing market is increasingly concentrated in two major applications. NPCI has therefore tried to prevent a single application from becoming overwhelmingly dominant, while encouraging competition from banks and newer fintech companies.
QR codes conquered the Indian street; Perhaps UPI’s greatest achievement is not the smartphone in the hands of the affluent consumer. It is the QR code outside the tea stall.The technology removed one of the biggest barriers to digital payments: merchant acceptance infrastructure.
A small shopkeeper does not need an expensive card terminal. A printed QR code can be enough.
That is why UPI has spread from restaurants and supermarkets to vegetable vendors, taxis, roadside stalls, temples, medical shops, and small businesses.
The forms of UPI have also multiplied: QR-code payments, UPI ID/VPA transfers, mobile-number payments, bank-account transfers, UPI AutoPay for recurring payments, UPI Lite for smaller-value transactions, UPI credit-card payments, UPI 123Pay for feature phones. international UPI and linked payment systems
This has turned UPI from a payment method into a platform.
Has UPI beaten Visa online? The answer requires some qualifications.
UPI has become extraordinarily powerful for domestic online purchases, particularly small and medium-value transactions. E-commerce sites, food-delivery companies, travel platforms, utility providers, and subscription services routinely offer UPI alongside cards.
But saying UPI has completely replaced Visa online would be wrong.
Cards remain important for credit, international transactions, travel bookings, higher-value purchases and consumers seeking reward points or instalment financing. RBI data still show substantial online card activity.
UPI’s advantages are different. It can take money directly from a bank account without requiring the consumer to enter card details, while authentication happens through the user’s bank-linked mobile interface.
For a ₹300 food order, a ₹1,000 grocery purchase or a ₹500 cab ride, UPI is extremely difficult for a card network to beat on convenience.
The next battle: Who pays for UPI? UPI’s greatest strength — being virtually free — is also its economic weakness. Banks and fintech companies have to operate expensive technology, cybersecurity, fraud monitoring, customer support and payment infrastructure. Yet the traditional merchant fee that would normally fund such a system has largely disappeared.
That is why the economics of UPI are now changing. In 2026, the government moved toward allowing merchant fees to be introduced again. Proposals have included MDR of roughly 0.25%-0.4% on selected business transactions above ₹2,000, while person-to-person transfers would remain free.
This is an important turning point.UPI was built to destroy the economics of expensive digital payments. It may now have to develop an economics of its own.
The next five years; PwC’s Indian Payments Handbook 2025-2030 provides a striking projection. It expects UPI transactions to rise from roughly 186 billion in FY2025 to about 576 billion by FY2030, combining person-to-person and person-to-merchant payments. That would mean roughly 1.6 billion UPI transactions a day by FY2030.
PwC projects annual transaction value rising from about ₹260.6 trillion in FY2025 to approximately ₹793.3 trillion by FY2030. Its projections imply continued strong growth, but at a slower rate as UPI approaches saturation.
The biggest new frontier may therefore not be India. It may be the world.
UPI is already operational in countries including Singapore, the UAE, France and Nepal, and India is seeking greater integration with foreign payment systems. The linkage between India’s UPI and Singapore’s PayNow has already demonstrated what cross-border instant payments can look like.
For Indians travelling abroad, this could reduce dependence on cards and foreign payment wallets. For migrant workers and families sending money home, interconnected instant-payment systems could eventually reduce the cost and friction of remittances.
The ambition is considerably larger than replacing cash at the neighborhood shop. It is to make India’s payment architecture an international public utility.
A quiet revolution; UPI’s real achievement may ultimately be less spectacular than the monthly numbers suggest. It has changed the psychology of money. Cash used to be the default. Cards were for formal commerce. Bank transfers were cumbersome. Digital wallets created separate ecosystems.
UPI collapsed these distinctions. A street vendor can receive money from a millionaire. A student can pay a multinational company. A farmer can receive money directly into a bank account. A customer can pay an online retailer without a card. And a bank in Kerala can transact seamlessly with a bank in Kashmir.
The world’s card companies built enormously successful global payment networks. India took a different route: build an interoperable public digital rail and let banks, fintech companies and technology companies compete on top of it.
That is why UPI is more than another payment application. It is India’s attempt to turn payments into infrastructure — much as roads, electricity and telecommunications became infrastructure in earlier economic revolutions.
And with 24.5 billion transactions already passing through the system in a single month, the experiment is no longer an experiment.
India has become a cash-light economy at extraordinary speed — and UPI is the railway on which that journey is travelling. (IPA Service)
