By – Anubhi Srivastava

Abstract

India’s Unified Payments Interface (UPI), launched in 2016, is a key example of ‘Glocalisation’ in digital payments, where global fintech principles are adapted to India’s diverse socio-economic landscape. It has rapidly ascended to become the world’s largest real time payment system, processing over 650 million transactions daily and dominating India’s electronic retail payments. This article aims to analyse the social impact of UPI and the changes it has brought in consumer behaviour since its introduction. It offers a critical lens to evaluate whether UPI, as both an idea and a product, can be adapted to different social contexts and explores potential improvements through relevant case studies and examples.

Introduction

India’s Unified Payments Interface (UPI) is a key example of ‘Glocalisation’ in digital payments through its adaptation to global fintech principles in India’s diverse landscape. Since its 2016 launch, it has become the world’s largest real-time payment system, processing over 650 million daily transactions and dominating India’s electronic retail payments. This article examines the social impact and transformative effect of UPI on consumer behaviour, critically evaluating its adaptability across various social contexts. Leveraging an open architecture and Application programming interface (API) based framework, UPI has integrated millions into the formal economy, offering real-time, zero-cost, mobile-first bank-to-bank transfers with regional language support. This has driven a behavioural shift from cash to digital payments (accelerated by the COVID-19 pandemic). UPI’s success offers a template for the Global South, emphasising interoperability, low-cost transactions, and public-private collaboration. Furthermore, drawing insights from Vietnam’s advancements in digital manufacturing and AI integration, the article explores how UPI can further enhance cross-border payment efficiency, security, and strategically expand globally. Ultimately, it represents a crucial step towards inclusive digital transformation worldwide with continued efforts and evolution. 

Understanding India’s UPI landscape 

UPI’s core strength lies in its open architecture and API-based frameworks. It enables over 350 banks and numerous third-party payment service providers (PSPs), including popular platforms like Google Pay, PhonePe, and Paytm, to develop and offer their applications. This demonstrates how public infrastructure can effectively collaborate with the private sector and leverage global financial technologies, and tailor their application to India’s local infrastructure, banking diversity and policy needs.

Millions of individuals from various walks of life, like gig workers in metropolitan areas to vegetable vendors in remote towns, have been integrated into the formal economy through UPI as it facilitates real-time bank-to-bank transfers directly from their mobile phones. Addressing the needs of India’s diverse population, it incorporates regional language support and accessibility features. It ensures greater reach through initiatives like UPI 123PAY and voice-based payments, which are available in 11 regional languages. Its user-friendly interface and zero-cost transactions provide a compelling use case. Additionally, its seamless integration with e-commerce platforms and payment services, including single-click or single-scan options via QR codes, has accelerated digital adoption and boosted conversion rates for retailers by simplifying the checkout process. The system’s real-time settlement and mobile-first design are critical for its utility. Payments are processed almost instantaneously (typically within milliseconds) and with immediate confirmation. Furthermore, it is built on a highly scalable and robust infrastructure. It operates 24 hours a day and 7 days a week. This resilient backbone allows the system to process billions of transactions monthly, underpinning its widespread daily use. Hence, it is safe to say that the platform has influenced consumer behaviour significantly. It has driven a major shift from cash to digital payments in the State. The platform processes an astounding volume of transactions, consistently exceeding 18 billion transactions monthly. This volume has cemented India’s position as the global leader in real-time payments and accounts for 48.5% of global digital payments. 

This reflects a behavioural shift in how individuals, businesses and institutions approach e-commerce and transactions. The convenience, speed and zero cost associated with UPI transactions have created a ‘frictionless payment’ experience, consequently altering how individuals perceive and engage with payments by making digital alternatives more appealing and efficient. Additionally, the widespread availability of mobile and internet access provided the necessary foundation for UPI’s mass adoption. Another crucial market intervention was the COVID-19 pandemic, which accelerated UPI’s adoption by driving the need for contactless payments.

In short, as a template for the Global South, UPI offers lessons centred on interoperability, low-cost transactions and public-private collaboration. India’s experience underscores the importance of contextual adaptation and offers an important model for diplomacy and international trade. 

Case Study – What UPI can learn from Vietnam

Vietnam’s rapid advancements in digital manufacturing and AI integration, particularly in its export-led growth strategy, offer valuable insights for the Indian UPI model. While UPI has revolutionised domestic digital payments and has the potential to extend its influence on global digital finance, it requires a deeper integration with modern-day advanced technologies that drive market competitiveness.

Vietnam’s example illustrates how the thoughtful adoption of AI within national economic priorities can unlock transformative efficiencies. The country’s focus on incorporating AI into its manufacturing processes has significantly boosted productivity and efficiency. It includes predictive maintenance to quality control, and optimised supply chains. This allows for real-time data analysis and automation, leading to higher quality goods and faster production cycles. For UPI, this translates to the opportunity for enhancing cross-border payment efficiency and security for businesses involved in international trade. Imagine UPI-enabled platforms that automatically reconcile payments with supply chain data, thereby leveraging AI to detect anomalies or optimise trade finance flows.

Equally important is Vietnam’s use of AI for market-facing functions such as demand forecasting and regional strategy in its export sectors. UPI’s strategic global expansion can take note of this. By integrating AI-driven insights into the UPI ecosystem, India could better identify potential markets for its digital payment services and understand local payment preferences, consequently tailoring it according to specific regional needs. This could lead to a more targeted and effective approach to promoting UPI as a global digital template.

At the heart of Vietnam’s strategy is its parallel investment in digital infrastructure to support its manufacturing and export ambitions highlighting the importance of interconnected digital ecosystems. For UPI, this means not only focusing on payment infrastructure but also exploring global partnerships with stakeholders like customs and trade platforms. By learning from Vietnam’s holistic approach to digital transformation in its export strategy, it can evolve from a domestic payment powerhouse to a comprehensive digital trade facilitator.

However, to transition from a successful national payment system to a digital trade enabler on the global stage, UPI must pursue three key shifts. First, it must evolve from a generic payment rail into an integrated trade platform. This means developing solutions that embed payments within business workflows, such as linking transactions to e-invoices on the GST Network (GSTN), through easy-to-use automated programs to improve the burdensome reconciliation process. Second, tackling the systemic challenges of B2B and cross-border trade requires a coordinated and “mission-focused” ecosystem strategy, mirroring Vietnam’s planned approach. A consortium of the RBI, National Payments Corporation of India (NPCI) and other key ministries/stakeholders must work together to set and regulate digital trade standards and incentives. Third, UPI’s development must be laser-focused on solving the problems of India’s SME exporters (such as high forex costs, opaque fees and complex compliance) just as Vietnam strategically uses digital platforms like Alibaba and Amazon to provide its SMEs with direct global market access.

In conclusion, Vietnam’s digital strategy offers India more than a technological reference point. It offers a strategic framework for aligning digital payments with national trade and development goals. By leveraging AI not only for operational optimisation but also for strategic global positioning, and by investing in digital ecosystems beyond the finance sector, Vietnam has created a playbook from which UPI can draw. If India wants UPI to evolve from a domestic digital marvel into a global fintech benchmark, it must learn from Vietnam’s model and act swiftly, decisively and collaboratively.

Conclusion

UPI has driven a transformative shift in consumer behaviour by accelerating the move from cash to digital. Its open architecture, real-time settlement and commitment to accessibility, including regional language support, have cemented India’s global leadership in digital payments. However, UPI’s journey continues. Lessons from nations like Vietnam highlight their potential to enhance cross-border payments and leverage AI for strategic global expansion. Ongoing efforts are vital to ensure universal digital literacy and fortify the system against evolving cybersecurity threats. To conclude, UPI is a compelling template for the Global South; however, its continued evolution, drawing from international experiences and embracing advanced technologies, will be crucial. UPI isn’t just a national success; rather, it’s a step forward towards an inclusive digital transformation worldwide.

Author Bio

Anubhi Srivastava is a B.A. LL.B. student at Jindal Global Law School and a columnist at CNES.

Image Source: https://easebuzz.in/explainers/upi/upi-transactions-limits/