In a post-pandemic world, the popularity of digital payments has grown by leaps and bounds. In particular, the Unified Payments Interface (UPI) has fast-tracked India’s journey to becoming a cashless economy. As an instant payment option, UPI in India has enabled the country to become one of the fastest-growing digital economies in the world and the third largest fintech ecosystem globally, as per a report by Ernst & Young.
According to the same report, India also bagged four of the top 10 fintech deals in the Asia-Pacific region in 2021. Indian fintech companies have seen steady growth with rising internet penetration and consumers switching to digital payment channels over the last two years.
As per the National Investment Promotion And Facilitation Agency, the Indian fintech industry is estimated to have a market size of $150 billion by 2025.
UPI in India
UPI in India, in particular, has significantly transformed the payments ecosystem. When it was introduced in 2016, only 21 banks were on board the platform. By September 2022, the number had grown to 358. UPI recorded 678 crore transactions worth Rs 11.16 trillion in September 2022.
You can make a UPI transaction on your Paytm application in a few simple steps. Click here for step-by-step guidelines for Paytm UPI money transfer.
Moreover, in August 2022, the government of India quashed rumours that transaction charges would be levied on UPI payments. In an announcement, the Ministry of Finance described UPI as a “digital public good” and vouched for its convenience and productivity.
The definition of a public good is subjective depending on the country one is referring to. It usually involves healthcare, national security, education, and basic infrastructure. They are essential services that ought to be made available to all citizens free of cost or at subsidised values with the intent of welfare and socio-economic development.
By branding UPI as a public good, the government has equated it to the aforementioned services that are considered the building blocks of a nation.
Indian fintech companies and the ‘public good’
To ensure the continued growth of UPI in India, the Indian government’s Niti Aayog has described the payment system as a “jewel among Indian fintech innovations.” As a result, fintech players that offer a platform to UPI are an essential part of the digital ecosystem.
UPI in India does not involve transaction charges, as they fall under the Zero-MDR policy of the government. While no costs are involved for users, Indian fintech companies invest heavily in payment infrastructures such as UPI that hinge on innovation and user experience. This can lead to reduced recovery rates.
However, given that UPI in India has grown to be considered a public good, most prominent players in the banking sector are looking to collaborate with fintech companies to tap into UPI’s potential. This involves not just funding but also working towards expanding the scale of Indian fintech companies.
Fintech companies further benefit from the ‘public good’ aspect of UPI in India as more consumers are being included in the formal banking channel, thanks to the scale and accessibility of UPI and, by extension, Indian fintech companies. The RBI also intends to further promote the growing digital payments industry by inviting new fintech firms to join the fold and contribute to the sector’s development.
With efforts to further accentuate the public good aspect of UPI well underway, Indian fintech companies could lead the next economic revolution in India.
