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The world on a QR code: How UPI disrupted the payments space

The world on a QR code: How UPI disrupted the payments space

There is a massive disruption which is being witnessed in the payments space thanks to UPI. From the vegetable vendor to the coffee shop to the upmarket restaurant in a five-star hotel, the QR code is everywhere, reducing the dependence on debit cards and cash, with even credit cards set to be disrupted in the near future.

By all accounts, the UPI interface is fast proving to be a massive game changer in the payments space. By all accounts, the UPI interface is fast proving to be a massive game changer in the payments space.

While picking up a packet of sweets at the airport when flying back from Kolkata recently, I asked the person at the counter how he wanted me to make the payment. Out came the Quick Response (QR) code, and in a few seconds, the payment was made via an app directly from my bank account thanks to the Unified Payments Interface (UPI) system. It’s so convenient, with no hassles of tendering change or waiting for connectivity on the point-of-sale (POS) machine, the person at the counter told me with a smile. By all accounts, the UPI interface is fast proving to be a massive game changer in the payments space. The figures tell the story. In just six years since the National Payments Corporation of India (NPCI) rolled out the UPI system for payments, it has cornered 16 per cent of total retail payments, with merchants adopting a staggering 30 million UPI QR codes. In July 2022 alone, as many as 6 billion transactions were processed through UPI, the highest since 2016. The value of transactions processed in 2021-22 via UPI was a whopping Rs 84.15 lakh crore, five times the amount of debit- and credit cards combined.

In our cover story, Anand Adhikari brings you the details of the massive disruption which is being witnessed in the payments space thanks to UPI. From the vegetable vendor to the coffee shop to the upmarket restaurant in a five-star hotel, the QR code is everywhere, reducing the dependence on debit cards and cash, with even credit cards set to be disrupted in the near future. As Ritesh Shukla, CEO of NPCI International Payments Ltd (NIPL), a subsidiary of NPCI, says: “Our competition is with cash. There is still a lot of it in circulation that we need to get rid of.” The next frontier for this indigenous disruptive technology is the $80-billion remittances market, and NIPL is now helping other countries build payment ecosystems and getting UPI to cross borders and be accepted in other countries.

Much like UPI is disrupting the payments ecosystem, India is also building out a broad-based platform for e-commerce that could change how digital commerce is undertaken in the country. To make e-commerce more democratic, the Open Network for Digital Commerce, or ONDC, is being built under the overall guidance of the iconic Nandan Nilekani. As Binu Paul reports, most small kirana stores are digitally excluded, and ONDC will bring the small sellers into the digital commerce ecosystem. As Nilekani said recently, ONDC is an idea whose time has come, and there needs to be a way for small sellers to compete in the new e-commerce world in equitable ways. The dominance of the big e-commerce platforms could soon be challenged.

Elsewhere in this issue, Vidya S. examines the growing phenomenon of high net-worth individuals moving overseas to set up alternative residencies, do business or just seek a better quality of life. The numbers, though not alarming at present, could point to a trend that policymakers need to take note of.