June 10, 2023

In just six years, UPI has become the most popular way for Indians to transact online. Mobile electronics payment systems were used for 6.57 billion transactions in the world’s second-largest internet market last month. Now, it is taking steps to supercharge its growth.

The payment network, which was created by a consortium of banks, is India’s attempt to challenge card companies in an open market, bring billions of people into the fold of digital payments and curb the spread of corruption.

“During the period between March 2020 and August 2022, UPI usage increased by 427%,” Central Bank of India Governor Shaktikanta Das said at a conference on Tuesday afternoon.

The central bank is working on expanding UPI to “several countries in Asia and the Middle East and other parts of the world” and setting up an international subsidiary, he said.

“UPI has emerged as the pride of the nation… It is an area where I think India can play a major leadership role in the world in the days to come. It’s a phenomenal product, but we have to be very careful with its infrastructure as it scales,” he added.

On Tuesday, Das said UPI’s two new offerings — one that expands its user case and the other will help it continue to scale — went live.

A lighter version of the payment system called UPI Lite is now live with eight banks in the country, including HDFC, SBI and Kotak, he said. UPI Lite, which was first offered earlier this year, processes payments under 200 Indian rupees ($2.5) and aims to reduce the burden on banks’ infrastructure, executives said at a conference on Tuesday.

For all its rapid-growth, UPI continues to face some challenges with its success rate. UPI Lite is designed to work in near-offline mode and appears to handle disposal slightly differently from its mature counterpart. “You will receive an SMS from your issuing bank for UPI LITE transactions once a day with a history of transactions made during the day,” explains a FAQ.

UPI Lite creates a virtual, on-device wallet that can hold up to $25. About 50% of UPI transactions are worth $2.5 or less. “UPI Lite will provide users with a convenient solution for quick and easy low-cost transactions,” said the National Payments Corporation of India, a special unit of the central bank that oversees UPI.

The central bank is also moving ahead with plans to link UPI with credit cards

Das said Indian banks will be the first to issue credit cards that link to UPI. By adding support for UPI on top of credit cards, the central bank is trying to boost adoption of the new payment system, allowing customers “more opportunities” to use their credit cards and build credit ratings, executives said.

“This could potentially increase credit card penetration and expand the reach of digital payments in India, positively impacting both card companies (eg SBI Card) and fintech platforms (eg Paytm),” Goldman Sachs analysts wrote about the move.

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