UPI: Birth of a Cashless Society

What is UPI?

Unified Payments Interaction (UPI) is a payment system that transfers money between two users.

Think of going from Destination A to Destination B. You can’t reach Destination B without some mode of transport (ex. Car, bike, bus etc.) Think of UPI as the ‘mode of transport’ between two destinations.

UPI is the adhesive for merging several bank accounts on one single mobile application. Users register their mobile number with their respective bank. With this registered number, they can make payments.

How it Started

India used to be a cash-dependent society. Everything from cheques to demand drafts, people were comfortable with physical payments. No one was ready to hand sensitive bank account details over to an online alternative, yet.

The National Electronic Funds Transfer (NEFT) was a transfer system that had timings for payments. NEFT also depended on the Electronic Cheque Clearance System (ECS) in case the former was not able to operate at a given time. But, NEFT was slow with transferring money, which often led to delays and transaction failures.

Imagine the losses that could incur in a payment system that sent your money in hours! It could mean something as serious as losing out a good deal between two companies. Organizations would be unable to hire new employees and be at risk of shutting down.

Given the situation, there was a dire need for real-time transactions that accelerated payments.

The National Payments Corporation of India (NCPI) understood this need. The Reserve Bank of India (RBI) which controls the governance, and the Indian Banks Association (IBA) formed the NCPI. NCPI wanted to find a solution that could cover all the gaps in the present system.

Then on 11th April 2016, NCPI launched UPI. NCPI, RBI, and IBA wanted everyone to trust digital payments as an efficient way to carry out payments. The demonetization of 9th November 2016 also encouraged people to use their credit/debit cards.


Taxi services, food delivery apps, and online grocery delivery apps are some industries that use UPI for payments.

Users can also use a QR code and hyperlink to conduct payments as well. E-commerce websites usually generate hyperlinks that redirect the customer to finish the payment. QR payments are for when the merchant and customer are in proximity to each other, for example, a local store.

UPI lowers the impact of burglary or theft on an individual too. Money is safe because it is linked with the bank accounts on UPI.

Current Adoption

The commencement of the pandemic in April 2020 amounted had to ‘99.95 crores’ transactions. As of October, UPI transactions have crossed 1.01 billion worth ₹19.19 billion. (Livemint)

What is the future of UPI?

According to The Hindu Business Line, India and China are currently the leaders of digital innovation today. Singapore added to the list of countries introduced to UPI. There also seems to be plans for introducing UPI to Tier 2 and Tier 3 cities. UPI Payments might even merge with Artificial Intelligence in the future.