UPI — an eventful journey

Source: The post “UPI — an eventful journey” has been created based on “UPI — an eventful journey” published in “DD News” on 26th August 2026.

UPSC Syllabus: GS-3-Indian Economy

Context: The Unified Payments Interface (UPI) was launched in 2016 with the objective of making money transfer as easy as sending a message. Over the last decade, UPI has emerged as the world’s largest real-time payment system by volume and an important pillar of India’s digital economy.

Foundations of UPI’s Success

1. The Digital India programme, launched in 2015, created the broader foundation for a digitally connected economy.
2. Jan Dhan accounts expanded access to banking, while Aadhaar provided a digital identity layer and mobile connectivity expanded access to digital services.
3. India now has more than 108 crore internet users, 130 crore mobile subscribers and 145 crore Aadhaar holders.
4. About 58.97 crore Jan Dhan accounts, including 32.86 crore accounts held by women, support financial inclusion.
5. More than ₹52 lakh crore has been transferred through Direct Benefit Transfer, creating a strong foundation for digital financial services.

Growth of UPI

1. UPI processed about 2 crore transactions in FY 2016-17, which increased to 24,162 crore transactions in FY 2025-26.
2. The value of transactions increased from ₹0.07 lakh crore to ₹314 lakh crore during the same period.
3. In the first four months of FY 2026-27, UPI processed 9,192 crore transactions worth ₹118 lakh crore, including 2,366 crore transactions in July 2026.
4. UPI accounts for around 84% of India’s digital payment volumes and serves more than 55 crore active users.

Contribution to Financial Inclusion

1. Around 86% of merchant transactions on UPI are below ₹500, showing its widespread use for small everyday payments.
2. Nearly 59% of person-to-person transfers are also below ₹500, indicating that UPI is not limited to high-value transactions.
3. Person-to-merchant payments accounted for 15,231 crore transactions in FY 2025-26, or about 63% of total UPI volume.
4. Payment acceptance points increased from 0.31 crore in March 2018 to more than 81 crore by June 2026, with around 80 crore being QR codes.
5. QR-based payments have enabled small merchants, street vendors and auto drivers to participate in the formal digital economy.
6. Digital transaction records can help small businesses demonstrate cash flows and potentially access formal credit.

Robust UPI Ecosystem

1. The DIGIDHAN Mission, launched in 2017, promoted digital payment adoption across the country.
2. The RBI’s Payment Infrastructure Development Fund supported payment acceptance infrastructure in Tier-3 to Tier-6 centres, the North-Eastern States and Union Territories.
3. UPI’s interoperable architecture allows customers using one application to pay merchants using another application.
4. This open architecture has enabled banks and fintech companies to develop new services without creating separate payment infrastructure.

Global Significance

1. The International Monetary Fund has recognised UPI as the world’s largest retail fast payment system by volume.
2. India accounts for nearly half of global real-time payment transactions.
3. UPI is operational in 11 countries, including the UAE, France, Singapore, Nepal and Sri Lanka.
4. Agreements for UPI-like systems have also been signed with Peru, Namibia and Trinidad and Tobago.
5. India’s experience is therefore becoming a model for countries developing their own digital public infrastructure.

Challenges

1. Cybersecurity risks may increase with the rapid expansion of digital payments and the growing use of UPI.
2. Fraudulent and suspicious transactions remain a concern, requiring continuous improvement in detection and prevention mechanisms.
3. Digital literacy gaps can make UPI difficult to use for first-time and less digitally experienced users.
4. Grievance redressal needs to become faster and more effective so that users can resolve failed or disputed transactions easily.
5. System resilience must be strengthened to ensure that UPI remains reliable during technical disruptions and periods of very high transaction volumes.
6. The benefits of digital payments must reach users who still face barriers to formal financial services.

Way Forward

1. Consumer awareness should be strengthened through wider digital and financial literacy initiatives.
2. Grievance redressal mechanisms should be made faster, simpler and more accessible.
3. Banks and payment providers should continue using AI-based fraud detection along with existing security measures such as device binding and PIN-based two-factor authentication.
4. UPI infrastructure should be continuously upgraded to improve system resilience, reliability and security.
5. UPI should be developed as a gateway to credit, savings and insurance, particularly for financially underserved sections.
6. India should continue promoting UPI and its interoperable digital public infrastructure model globally.
7. The next phase should ensure that UPI carries not only payments but also the broader financial journey of every Indian, supporting the vision of Viksit Bharat by 2047.

Conclusion: UPI has transformed digital payments from a primarily urban service into an important instrument of mass financial inclusion. Its success is reflected not only in transaction volumes but also in the trust of small merchants and ordinary households. As UPI enters its second decade, the focus should shift from merely expanding payments to building a secure, resilient and inclusive financial ecosystem, contributing to the vision of Viksit Bharat by 2047.

Question: UPI has evolved from a digital payment platform into a major public digital infrastructure in India. Discuss its contribution to financial inclusion and the challenges that need to be addressed in its next phase.

Source: Business Line