Unified Payment Interface (UPI)

Unified Payments Interface (UPI) is an Indian instant payment system developed by the National Payments Corporation of India (NPCI) in 2016. UPI revolutionized digital payments by enabling instant 24×7 fund transfers between bank accounts via a mobile phone. Instead of using bank account numbers and IFSC codes for transfers, UPI uses a Virtual Payment Address (VPA) (e.g. name@bank) that links to a user’s bank account. This simplification makes sending or receiving money as easy as using an email address for payments. UPI runs on the backbone of the Immediate Payment Service (IMPS) network, ensuring real-time transaction settlement any time of day. Each transaction is secured with two-factor authentication (such as a UPI PIN), but designed to be seamless and fast with a one-click experience.

How UPI Works

To use UPI, a customer registers with any UPI-enabled app (such as BHIM, Google Pay, PhonePe, etc.) and links one or more bank accounts. The app creates a VPA (UPI ID) for the user (for example, ravi@icici) which can be shared instead of account details. When a payment is initiated, UPI routes the transaction from the payer’s bank to the payee’s bank instantly through NPCI’s infrastructure. UPI leverages IMPS to settle funds, enabling immediate credit to the recipient’s account even on weekends or holidays. This interoperability means a single mobile application can access multiple bank accounts and handle both person-to-person (P2P) and person-to-merchant (P2M) payments. For security, UPI uses device binding and UPI PIN authorization for each transaction, ensuring robust two-factor authentication without sacrificing convenience.

Growth and Adoption

Since its launch, UPI has become India’s most popular digital payment method. It has dramatically grown in volume – by 2025 UPI was processing about 20 billion transactions per month (roughly 7,500 transactions per second) and handling values around ₹25 trillion in a single month. This unprecedented scale (accounting for an estimated half of all instant payment transactions globally) showcases UPI’s success and reliability. The ubiquity of UPI has made cashless payments commonplace for everything from splitting a bill with friends to paying utility bills, all with a simple mobile app. Importantly, UPI is a 24x7x365 system – payments can be made anytime, anywhere, empowering users with constant access to their funds.

UPI Variants

As the UPI system evolved, NPCI introduced variants and add-on features to cater to specific needs and use cases. Two key innovations are UPI Lite and UPI AutoPay, which were developed to enhance UPI’s functionality for offline small-value transactions and recurring payments, respectively.

UPI Lite – Offline Small-Value Payments

UPI Lite is an on-device wallet feature within UPI apps, launched in 2022, enabling offline, small-value digital payments. Users preload funds from their bank account; payments deduct from this balance and sync with banks when online.

• Connectivity & PIN: Payments can be made without internet and without entering a UPI PIN per transaction. Authentication is required only while loading money into the wallet.
• Limits: Initial wallet balance cap: ₹2,000. Initial per-transaction cap: ₹200. Per-transaction cap increased to ₹500 in 2023 by Reserve Bank of India. Wallet balance limit remains ₹2,000.
• Purpose & Rationale: Designed because ~50% of UPI transactions are below ₹200. Targets frequent, low-value payments.
• Use Cases: Effective in low-connectivity settings (rural areas, crowded events). Suitable for transit fares, tea, coffee, groceries.
• Network Impact: Offloads high volumes of micro-transactions from core UPI systems, reducing network load and improving overall transaction speed.

UPI AutoPay

UPI AutoPay is a UPI feature for recurring payments using electronic mandates (e-mandates). Launched with UPI 2.0 in July 2020, it enables automatic payments for subscriptions, utility bills, loan EMIs, insurance premiums, OTT services, and other recurring charges.

• How It Works: Users create an e-mandate in a UPI app by specifying amount and frequency. A one-time UPI PIN authorizes the mandate. Payments are then auto-debited as scheduled. Mandates can be viewed, modified, paused, or cancelled anytime in the app.
• Limits and Security: For mandates up to ₹2,000, debits occur automatically without a PIN each cycle. For amounts above ₹2,000, PIN authentication is required for every debit. Mandates support one-time or recurring frequencies (daily, weekly, monthly, etc.) and follow RBI e-mandate rules, including alerts and easy cancellation.
• Benefits: UPI AutoPay ensures timely payments, avoids missed due dates and late fees, and reduces manual effort. It benefits users and service providers through reliable, on-time collections. It is widely used for OTT subscriptions, SIPs, utility bills, insurance premiums, and similar recurring payments.

UPI International

UPI International is the expansion of India’s UPI system for use outside India. It allows Indian bank account holders to make payments abroad using UPI apps and enables cross-border interoperability with foreign payment systems. This expansion is led by NPCI International Payments Ltd (NIPL).

Where UPI Is Accepted

Indian travellers can use UPI to pay overseas merchants directly from Indian bank accounts. Countries with UPI acceptance include Bhutan, Nepal, Singapore, UAE, France, Sri Lanka, and Mauritius. Bhutan was the first adopter (2021). Singapore linked UPI with PayNow. UAE has wide merchant acceptance. France became the first European country to accept UPI in 2023. More corridors are being added.

How UPI International Works

NIPL partners with foreign banks, payment networks, and regulators to enable interoperability. When a user scans a UPI QR code abroad, the transaction is routed through NIPL, currency conversion happens automatically, and the Indian bank account is debited in INR while the merchant receives local currency. Users do not need international cards or foreign cash.

User Experience and Benefits

Payments abroad work like domestic UPI—scan a QR code or enter an ID. This benefits tourists and the Indian diaspora by reducing reliance on cash and cards, lowering costs, and improving convenience. It also promotes India’s digital payments infrastructure globally.

Role of NIPL

NIPL signs MoUs and agreements with international partners, ensures regulatory compliance, and builds cross-border payment infrastructure. Some corridors support one-way payments (Indian users paying abroad), while others enable two-way transfers and remittances.

Examples of Enabled Countries

• Bhutan – First UPI adopter; BHIM QR payments (2021)
• Nepal – UPI linked with Fonepay (2021; expanded 2024)
• Singapore – UPI–PayNow linkage (2023–24)
• UAE – Large-scale merchant acceptance (2023)
• France – First European adopter (2023)
• Sri Lanka – Select merchant acceptance (2024)
• Mauritius – UPI enabled to support tourism and remittances (2024)

UPI–PayNow Integration (India–Singapore Corridor)

The UPI–PayNow linkage connects India’s UPI with Singapore’s PayNow, enabling real-time cross-border person-to-person remittances. It went live in February 2023 and is one of the first integrations between two national fast payment systems.

Key Features

Users in India and Singapore can send money using mobile numbers or UPI IDs. Transfers are instant, available 24×7, and settled in local currencies (INR or SGD) with automatic currency conversion.

How It Works

An Indian user sends money via a UPI app by entering the recipient’s Singapore mobile number (PayNow ID). A Singapore user sends money by entering the Indian recipient’s UPI ID. Funds are debited in the sender’s currency and credited in the receiver’s currency within minutes.

Participating Institutions

The corridor was launched with selected banks in both countries and is expanding. Integration and operations are led by NPCI International Payments Ltd in coordination with banks and payment networks.

Limits and Use Cases

The daily limit is ₹60,000 per user (≈ SGD 1,000). Transactions are permitted only for personal remittances such as gifts and maintenance under India’s LRS framework. Business and trade payments are not allowed.

Regulation and Oversight

The linkage operates under regulatory supervision of Reserve Bank of India and Monetary Authority of Singapore, with compliance to forex, AML, and capital control rules.