India’s digital payment infrastructure was under the spotlight earlier this week, for all the good reasons. On 20 August, the German embassy in India posted a video on X (formerly Twitter) of Germany’s federal minister for digital affairs and transport, Volker Wissing, using the Unified Payments Interface (UPI) to make a payment at a vegetable stall in Delhi. The embassy described Wissing’s experience of using UPI payments as “fascinating”.
While seamless payments by simply scanning a QR code and entering a PIN aren’t entirely fascinating to us any more, it is true that India has seen a revolution in digital payments since 2016. This is largely owing to UPI, which facilitates inter-bank peer-to-peer (P2P) and person-to-merchant (P2M) transactions. It has been developed by the National Payments Corporation of India (NPCI), a not-for-profit owned by a consortium of major banks and promoted by the Reserve Bank of India (RBI), set up in 2008. Yes, unlike the general perception of it, UPI isn’t a “government service”.
UPI is considered one of the most successful payment systems in the world, in terms of the number of users, volume of transactions and number of transactions. In 2022, UPI enabled over 2,348 transactions every second. In July, there were a whopping 9.96 billion UPI transactions, with a value of ₹15.34 trillion, according to the NPCI.
Scanning to pay remains the most popular way of making digital payments as many people still haven’t tried the other ways one can pay via smartphones and/or the UPI apps. Here are some of the other ways to make digital payments.
What’s better than scan-to-pay? Tap-to-pay. NFC (near-field communication technology) payments are one of the most widely used payment methods outside India, though digital payments here have been driven by QR codes. That was also because most budget smartphones in India do not pack in NFC chips to cut costs, unlike the Western markets where most phones support NFC.
Now popular UPI apps like Google Pay and Paytm have enabled support for contactless NFC payments. The NFC chip on smartphones works like the chips found on credit and debit cards that support contactless payments. It saves one the hassle of turning on the phone, firing up the UPI app and scanning the QR code.
All you need to do is to tap the back of your smartphone on the payment terminal, or PoS. The transaction will be done automatically if the amount is less than ₹5,000. However, if the amount is more than ₹5,000, you will need to enter the PIN on your smartphone.
At the moment, only select Visa and Mastercard cards issued by certain banks are supported. Also, even though several premium smartwatches support tap-to-pay, you can’t make NFC payments via them in India since the UPI apps do not support those smartwatch platforms (although the Samsung Galaxy Watch 6 series launched this month does support tap-to-pay in India via Samsung Wallet).
India’s tryst with digital payments began with mobile wallets. Paytm, Mobikwik, Freecharge and others were the first digital payment apps most of us used to make small-value transactions at merchants or to transfer money to friends and family.
Even now, some people use the digital wallet feature offered on UPI apps for quick transactions without the UPI PIN. UPI Lite, which takes forward that concept, is an on-device prepaid wallet where you don’t have to enter the PIN.
Most of the popular UPI apps like Google Pay, PhonePe and Paytm support UPI Lite. You just need to enable the feature and choose the primary bank account that will fund the wallet. UPI Lite works exactly like UPI and can be used to transfer money via UPI ID or phone number as well as make transactions via a QR code.
This wallet can be used for any UPI transaction with a value of less than ₹200 (the RBI has recently proposed raising the transaction limit to ₹500). The maximum balance you can keep in your UPI Lite wallet is ₹2,000, to contain the risks associated with the relaxation of two-factor authentication.
One of India’s success story is digital infrastructure. UPI enables everybody to make transactions in seconds. Millions of Indians use it. Federal Minister for Digital and Transport @Wissing was able to experience the simplicity of UPI payments first hand and is very fascinated! pic.twitter.com/I57P8snF0C— German Embassy India (@GermanyinIndia) August 20, 2023
RuPay (a portmanteau of rupee and payment), a financial services and payments system conceived by the NPCI, facilitates electronic payment at all Indian banks and financial institutions.
Like Visa and Mastercard, several banks issue RuPay credit and debit cards to customers. You can link the RuPay credit cards to UPI apps and use the card for seamless UPI payments. Earlier, UPI payments were limited to bank accounts; with this new feature, RuPay credit cards can be used via UPI. Since the NPCI wants to push usage of RuPay, the feature isn’t available for credit cards issued by Visa and Mastercard.
While this offers the convenience of digital transactions without a physical card and at merchants which do not otherwise accept credit cards, it also gives people the option of using the credit facility while making UPI transactions instead of using funds from one’s bank account.
While tap-to-pay transactions are limited to UPI apps, there’s a way to use credit or debit cards for payments without one as well. It’s not official, though.
Google Wallet is a mobile payments app that allows users to make payments both online and at physical stores. The app is not available in India (and you will have to sideload it using APK files) since Google offers Google Pay for the Indian market.
You can use Google Wallet, at your own discretion, to bypass UPI registration processes and set up Tap-to-Pay directly for your credit cards.
This works for any Android smartphone that supports NFC. That said, if you use, say, a Samsung smartphone, you could give this a skip since Samsung Pay offers similar functionality.
What’s next? Digital Rupee (e ₹), a tokenised digital version of the rupee, issued by the RBI. It’s essentially an electronic form of paper currency, not cryptocurrency. It’s virtual money regulated as legal tender, with no volatility. Its value remains the same, just like the value of physical cash. Like cash, you can transfer this digital money to family and friends and use it for merchant transactions using QR. Digital Rupee was launched last December and several public sector and private banks are participating in the pilot project.
Abhishek Baxi is a technology journalist and digital consultant.