Introduction
India has witnessed remarkable growth in digital payments in the last few years, driven by various factors such as the introduction of the Unified Payments Interface (UPI), the emergence of e-wallet players, the demonetization of high-value currency notes in 2016, and the COVID-19 pandemic. According to a report by Boston Consulting Group and PhonePe, India’s digital payments market is expected to increase more than threefold from US$3 trillion today to US$10 trillion by 2026. All these changes have completely overhauled payment operating systems.
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One of the key drivers of this growth is UPI, an instant payment system developed by the National Payments Corporation of India (NPCI) that allows inter-bank peer-to-peer (P2P) and person-to-merchant (P2M) transactions using a virtual payment address (VPA) instead of bank details. UPI is an open-source API that enables third parties like WhatsApp, Google Pay, PhonePe, Paytm, and others to implement payments in their own apps. UPI charges 50 paise or less for each transaction, making it the most cost-effective way of money transfer.
UPI And In-App Transaction
UPI has seen rapid adoption among users and merchants in India since its launch in 2016. As per NPCI data, UPI recorded over 4.2 billion transactions worth over Rs 7.4 lakh crore in April 2021, compared to 1 billion transactions worth Rs 2 lakh crore in April 2020. UPI’s share of payment systems across India by volume was 35% in the financial year 2021 and is projected to increase to 75% by the financial year 2026.
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One of the reasons for UPI’s popularity is its integration with various apps that offer different use cases and services to users and merchants. Using the UPI Plug-In SDK, merchants can receive payments through UPI without the customer having to open up any third-party app during payment. For example, WhatsApp Pay allows users to send and receive money within chats; Google Pay offers rewards and cashback for transactions; PhonePe provides access to various financial services like insurance and mutual funds; Paytm offers a range of online and offline payment options, and so on. These apps have built a large QR-code-based merchant acceptance network across India, making it easier for users to pay at shops, restaurants, e-commerce platforms, and other places using UPI.
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In-app UPI payments have also enabled merchants to get greater access to credit, as they can use their transaction data to avail loans from banks and fintech players. Moreover, in-app UPI payments have helped merchants save on transaction costs, as they do not have to pay any fees for accepting UPI payments from customers.
Conclusion
In conclusion, in-app UPI payments have revolutionized the digital payments landscape in India by offering convenience, security, affordability, and versatility to both users and merchants. With the support of NPCI, RBI, IBA, and other stakeholders, UPI is expected to continue its growth trajectory and contribute to India’s vision of becoming a cashless society. In-app UPI transactions enhance the ease of convenience for the users. Users prefer in-app UPI payment over other payment methods for a number of reasons, such as zero cost of making payment through UPI, less time-consuming method when compared to card payment , ease of convenience associated with scanning QR code, etc.
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