The Rise of Digital Payments in India

How India’s UPI ecosystem has impacted customers and digital payments, with pros and cons.

PCI launched UPI on 11th April 2016, since then digital payments space has wholly changed across India. UPI brought all major Indian Banks on a single platform run and managed by a government-run entity NPCI. Now, the Government had a weapon to fight against the likes of big giants like Visa and Mastercard. UPI gained its pace when PM Modi announced demonisation of ₹500 and ₹1000 Banknotes on 8th November 2016. Now the people were left with no other option to use digital payments, at that time other than cards, Mobile wallets like Paytm, Mobikwik were the only option that people had. UPI bought a new way people can send or receive money with each other and merchants don’t have to rely on costly POS to accept payments. Due to the government push towards opening Bank accounts for low-income individuals through Jan Dhan Yojana, the launch of low-cost smartphones by Chinese players and affordable mobile carrier Jio, UPI has all resources in place to bring next 100 million people to its platform. Now its was the turn of big players like Google, Amazon, Flipkart to make UPI their next battleground. This rivalry brought an excellent opportunity for UPI. These companies were paying their own money to get people on their app and eventually UPI in the form of referral bonus and cashback on transactions. Within the next three years, UPI became the most used payment method in India and has brought a vast number of people towards digital payments. With time, UPI also made considerable changes in its platform and also launched UPI 2.0 in August 2018. NPCI also started adding more and more features to UPI platform to attract more people towards it, including Recurring mandate, GST etc. To push digital payments further, Government announced zero MDR on accepting payments through UPI and Rupay effective from 1st January 2020. This decision made accepting payments from UPI entirely free for businesses. In the series of big decisions in the space, the Government announced the use of UPI as only payment based QR code in India, payment aggregator to come under RBI and data protection laws. Here are some Pros and Cons of UPI at present market space.


  • One Platform: Users can pay and accept from QR code issued by any UPI app; they do not have to look for specific QRs.
  • Free: UPI is free to use, merchants can accept payments without any charges, and money transfer is also free.
  • Trust: As compared to a private entity, UPI is owned by a government entity and now regulated by RBI, so people tend to trust more.


  • Monopoly: With UPI, the Government is trying to prevent competition, which is not suitable for a healthy market.
  • Business Model: UPI relies on Banks to bear all the transactional charges, and they are not earning anything. It makes UPI the loss-making business of the Bank.
  • Infrastructure: The failure rate of UPI transactions is much more than Cards. At a time in a single transaction, as high as eight entities can be involved in a UPI transaction and a timeout at one end can make transaction pending. Since the banks are not making any money, they also have a limitation on UPI spendings.

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Aspiring Entrepreneur | Product Manager | IIT Roorkee

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