Digital payments: Third-party apps drive growth for UPI


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When the Unified Payments Interface (UPI) was launched in April 2016, it was expected to be the banks’ answer to compete with the digital payment platforms, particularly wallets, that were gaining traction. Two years later, even though banks remain the underlying for money transfer made through UPI, third-party platforms such as Google Tez, WhatsApp and Paytm have driven the growth of the platform. Data sourced from Reserve Bank of India (RBI) and National Payments Corporation of India (NPCI) show that at Rs 50.46 billion, the monthly addition in value of UPI transactions in March 2018 was over ten times from March 2017. The growth in usage started exploding since September 2017, when UPI went live on Google Tez and Airtel Payments Bank.


  • Even after September, when these two platforms were launched, there were sudden surges in UPI value in the succeeding months when other platforms launched their UPI offerings. While it may not be directly attributable to one particular service, following the beta launch of UPI payments on WhatsApp, transaction value grew from Rs 155.4 billion in January to Rs 241.5 billion in March.
  • In volume terms, too, the growth was visible. Following the launch of UPI on Google Tez and Airtel Payments Bank, the volumes doubled in a month to 30.8 million in September from 16.6 million in August 2017. Compared with August, the UPI volumes in March were more than ten times higher at 177.9 million.
  • Traditionally, digital payment companies, particularly those in the prepaid wallet business have used cashbacks as a marketing technique to lure in new customers leading to an inorganic growth in number of users. Other players in the fray offering UPI-based payment services are NPCI-run BHIM, or Bharat Interface for Money, Flipkart-owned PhonePe, Axis Bank-owned FreeCharge, apart from mobile apps of all the major banks. Notably, according to NPCI data, transactions on BHIM in value terms during the 12-month period ended March 2018 were around 27 per cent of the total UPI transaction amount.
  • In April 2016, NPCI launched a pilot programme of UPI with 21 banks that went live. As of April 2018, there are 95 banks on board the UPI system. NPCI says that UPI caters to the peer-to-peer payments in particular and offers a unique proposition in form of availability of all bank accounts through a single app. Further, for the customer, the platform brings benefits such as round the clock availability, use of a virtual ID which is deemed to be more secure as there is no credential sharing and single click authentication.

Unified Payments Interface (UPI)

  • Unified Payments Interface (UPI) is a system that powers multiple bank accounts into a single mobile application (of any participating bank), merging several banking features, seamless fund routing & merchant payments into one hood. It also caters to the “Peer to Peer” collect request which can be scheduled and paid as per requirement and convenience.
  • With the above context in mind, NPCI conducted a pilot launch with 21 member banks. The pilot launch was on 11th April 2016 by Dr. Raghuram G Rajan, Governor, RBI at Mumbai. Banks have started to upload their UPI enabled Apps on Google Play store from 25th August, 2016 onwards.

How is it unique?

  • Immediate money transfer through mobile device round the clock 24*7 and 365 days.
  • Single mobile application for accessing different bank accounts.
  • Single Click 2 Factor Authentication – Aligned with the Regulatory guidelines, yet provides for a very strong feature of seamless single click payment.
  • Virtual address of the customer for Pull & Push provides for incremental security with the customer not required to enter the details such as Card no, Account number; IFSC etc.
  • Bill Sharing with friends.
  • Best answer to Cash on Delivery hassle, running to an ATM or rendering exact amount.
  • Merchant Payment with Single Application or In-App Payments.
  • Utility Bill Payments, Over the Counter Payments, Barcode (Scan and Pay) based payments.
  • Donations, Collections, Disbursements Scalable.
  • Raising Complaint from Mobile App directly.

UPI – Benefits to the Ecosystem participants

Benefits for banks

  • Single click Two Factor authentication
  • Universal Application for transaction
  • Leveraging existing infrastructure
  • Safer, Secured and Innovative
  • Payment basis Single/ Unique Identifier
  • Enable seamless merchant transactions


Benefits for end Customers:

  • Round the clock availability
  • Single Application for accessing different bank accounts
  • Use of Virtual ID is more secure, no credential sharing
  • Single click authentication
  • Raise Complaint from Mobile App directly


Benefits for Merchants:

  • Seamless fund collection from customers – single identifiers
  • No risk of storing customer’s virtual address like in Cards
  • Tap customers not having credit/debit cards
  • Suitable for e-Com & m-Com transaction
  • Resolves the COD collection problem
  • Single click 2FA facility to the customer – seamless Pull
  • In-App Payments (IAP)

Q.1 With respect to Unified Payments Interface (UPI), consider the following statements

  1. It is a common platform through which a person can transfer money from his bank account to any other bank account in the country instantly using nothing but his/her UPI ID.
  2. It is developed by the National Payments Corporation of India (NPCI) under the guidelines of the RBI.
  3. The interface will be based on the Immediate Payment Service (IMPS) platform.

Choose the correct answer from the codes given below

  1. 1 only
  2. 1 and 3 only
  3. 1 and 2 only
  4. All of the above

Answer: d) all of the above

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