Rajan, economic sorcery and UPI

Raghu Ram Rajan’s parting gift to Indians forever changed the landscape of day to day transactions in India. Three years into its inception, today UPI is used by over 142 banks, and as of March 2019, the value of transactions carried out on this interface amounted to a whopping ₹1.334 trillion (US$19 billion).

Unified Payments Interface or popularly know as UPI is a real-time instant payment system developed by National Payments Corporation of India to facilitate inter-bank transactions. The UPI interface works instantly by transferring funds between two banks using a mobile application.  The process is simple, easy and safe, making it the foremost choice of the populace. 

A stroke of genius, the conception of UPI catapulted India towards digital empowerment.  The RBI under Rajan’s tutelage created of financial instruments that can be best termed as avant-garde. 

Even though the evolution of banking services is unavoidable Rajan with UPI took it a step further. A positive disruption, UPI is the world’s first truly open and decentralised payment system. UPI’s vendor agnosticism made it easier for e-commerce portals, NBFC’s, other banking institutions to integrate it within their payment application,  thereby eliminating the need to use multiple applications for the sole purpose of payments.  

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No other country has seen the democratisation of a payment system that reaches out to such a vast audience. With the UPI, a person can transfer money from one account to another as quickly as sending an SMS. It enables anyone with a smartphone to transfer money using a simple two-step authentication process. It essentially converts a mobile phone to a virtual debit card. All that it requires is the Aadhar number and a mobile phone number or a virtual address without the need for account details or IFSC codes.

UPI has changed much of the payment panorama in the country.   Today, we have mobile apps that are built around this system; some honorary mentions are as follows PhonePe, Paytm, Freecharge etc.  Soon big corporation found themselves exploring this space and thus spawned GooglePay and AmazonPay. 

Indians welcomed UPI with open arms and embraced it to the point that today even the local grocer accepts payment via UPI. The biggest driver of the digital and cashless India narrative, UPI, witnessed 1,029.44 crore transactions till August 2019. The mobile-only payment system helped transact a total of ₹17.29-lakh crore during the 37 months of operation starting from 2016.

While most feared that UPI might not be as safe, it allayed all fears over the three years of its operation. Today, banks are willing to let people withdrawn money with the help of UPI to help reduce the risk of ATM frauds. Not only this, UPI may soon permeate into GST as NPCI clears GST sops for UPI QR code payments. By next year consumers and merchants might be able to avail tax incentives for digital payments through QR code on Unified Payments Interface. 

While UPI drives a lot of conversation very little credit is given to Raghu Ram Rajan who spearheaded its creation. His tenure as the RBI governor was marked with success, innovation and adequate amount of controversy. UPI’s success is a small window into the genius of Rajan, a visionary and innovator.