Viral Growth of UPI in India and the World
How and Why UPI is Growing?
If you're building a tech startup, you need to understand the growth of UPI in India (more so, if you are in FinTech).
It has completely revolutionized the way people make payments, leading to India surpassing other major economies in the sheer volume of digital transactions.
The impact of UPI is so significant that it's now being considered as a model for transforming payments globally.
Google even recently suggested to the US Federal Reserve that they consider a UPI-like system for America.
Let's break down what UPI is, why it's taken off so dramatically, and the lessons it holds for you, the startup founders.
What is UPI? Effortless Payments
UPI is the bridge between your bank account and your phone. It lets you send or receive money in a snap, directly from one bank account to another. No more fiddling with account numbers, bank routing codes, or any of that nonsense.
The magic really happens with QR codes. Think of those little pixelated squares you see everywhere now. With UPI, you just scan a store's code, enter the amount, and boom – payment done in seconds.
Security-wise, UPI has a few layers going on. You have two-factor authentication, which means you need your phone AND a PIN to make a payment. Plus, all that sensitive bank info never actually gets shared with the store. It stays safe between your bank and the UPI system.
So, how does UPI stack up against your wallets or credit/debit cards?
Simplicity: Wallets, cards... they can still be clunky. Either you're loading money into the wallet or remembering multiple card numbers and expiration dates. UPI wins here – it's your bank account, but way easier to access.
Acceptance: UPI is becoming the standard. More and more shops, big and small, are accepting it. Cards have been around longer, but wallets are often limited to certain platforms or stores.
Cost: There are no extra fees for using UPI. Cards on the other hand? Merchants sometimes get hit with fees, which they may pass on to you.
Bottom line: UPI is designed to be super easy, secure, and widely usable.
The Catalysts Behind UPI's Viral Growth
A. The Government: UPI's Biggest Cheerleader:
The Indian government played a massive role in building trust and driving its crazy-fast adoption. Let's break down how:
The Big Shakeup: Demonetization (2016)
In 2016, the government suddenly declares that most of the cash in circulation just isn't valid anymore. That's basically what happened with demonetization. The goal was to fight counterfeit/black money and shady financial dealings, but it also caused a major cash crunch. People desperately needed other ways to pay… and in stepped UPI.
people in line to exchange their old discontinued notes for the new ones issued by the government. Making It Worthwhile: Zero MDR
Those annoying little fees you pay when using a credit card? That's called the Merchant Discount Rate (MDR). The government basically waived MDR fees for UPI and some debit card transactions. Suddenly, it was just as cheap (or cheaper!) for shops to accept UPI as taking cash. That's HUGE.The Government as Influencer The government didn't just change the rules, they became UPI's official promoter! Constant campaigns, pushing UPI as this reliable, patriotic way to pay... It's influencer marketing, but with the credibility of the entire government behind it. This gave people the confidence to try UPI, and once they did, they never looked back.
Why Was This So Crucial?
Think about it: you build an amazing new app, but nobody trusts it with their money. The government essentially said, "Hey everyone, this UPI thing is legit, and it's good for India." That made a massive difference in people's willingness to try it out.
B. User-Centric Design and Security (It Just Works… For Everyone):
Think of trying to teach your grandma how to use some complicated app. That's NOT what happened with UPI. Here's what makes it so user-friendly:
QR Codes are King: No long account numbers. No complicated websites. You see a QR code, scan it, type how much you want to pay, enter your UPI PIN and it's done. Even people who've barely used smartphones grasped this quickly.
Your Language, Literally: UPI works in tons of regional Indian languages. This is key, because India has so many different languages – making it accessible to more people is a huge win.
Security That Doesn't Get in the Way: UPI requires your phone AND a PIN to send money. You can't accidentally pay someone just because your phone was unlocked. But, it's not so complicated that it turns people off. That balance is tough to strike!
Your Bank, Your Choice: UPI isn't tied to one specific bank or app. You can link whatever bank account you already have, and there are tons of UPI apps (which was also a factor for growth) with different features.
Payment Options Galore: Now, UPI isn't just about scanning QR codes. You can pay using someone's unique UPI ID (kind of like an easy-to-remember nickname for your bank account), phone number, and now even linked credit cards. It's more about the secure connection to your bank than any one specific way to pay.
The Big Takeaway: UPI wasn't built JUST with techies in mind. It was designed to be as inclusive as possible, and that's one of the main reasons it spread like wildfire across India.
Important Note: Having the right SIM card in your phone is indeed a part of UPI's security. This layer helps prevent someone from stealing your phone and draining your bank account.
C. Capitalism won again
This is where it got interesting. The best feature of the UPI is that it’s not just a mobile app on its own. But it’s a technology. Which means that it can be adopted by anyone with the right security and permission.
and in comes the Fintechs of India, which are countless. All wallet apps like PhonePe, Paytm, GPay, and many others made UPI an integral part of their apps.
The government made it very enticing for them.
Now it was time for capitalism to take over. To establish a monopoly in the market, these companies themselves invested a lot in the campaign promoting that people should be using UPI from their app.
They were competing against each other and in all of it UPI won.
Now almost every FinTech app in Indian market has an option to make a payment using UPI, all you gotta do is connect your bank account to that app. The process just takes less than 5 minutes. And you don’t even have to enter any bank account-related details. If you have the right SIM, all is done.
D. The Tech Revolution That Made it Possible:
UPI is impressive, but it wouldn't have exploded like it did without a few key things happening in the background:
Smartphones for Everyone: Remember when smartphones were this fancy, expensive thing? Those days are gone in India. Affordable smartphones flooded the market, putting the power of the internet (and UPI) into the hands of way more people.
The Internet Gets Cheap: Around the same time, mobile data plans got ridiculously affordable. Suddenly, even folks on tight budgets could be online most of the time. This is critical because UPI needs that connection to work.
(story of how Jio took all other telecom providers to cleaners is a Tale for another day)
A Phone-First Nation: India basically skipped the whole "everyone has a desktop computer" phase many other countries went through. Millions of people got online for the first time through their phones. So, apps and services designed with mobile in mind had a natural advantage.
The Domino Effect
Think of how these trends ripple out:
Banking Goes Mobile: More people with smartphones means banks HAD to offer apps and services that actually work well on mobile. This paved the way for UPI to seamlessly connect to those accounts.
Beyond the Cities: UPI isn't just a big-city thing. Affordable internet and smartphones meant smaller towns and villages could get connected too. This opened up a massive new market for digital payments.
Banking the Unbanked: It's easier to open a bank account from your phone than going to a branch and dealing with paperwork. UPI helped drive a surge in new bank accounts, bringing more people into the financial system who may have been excluded before.
The Perfect Storm: All the stars aligned for UPI. The government push, the smart design, and the fact that the tech was finally widespread and affordable created this unstoppable force.
The World Takes Notice: UPI's Global Potential
It's not an Indian phenomenon anymore. Countries like Singapore, Bhutan, and others are actively exploring and adopting UPI systems. Why the hype?
The Proof is in the Pudding: India has demonstrated that the UPI model can be wildly successful. When you see something working so well in a huge, diverse market like India, it gets attention.
A Template, Not a Copy: The beauty of UPI is that it's not a one-size-fits-all solution. The core idea of seamless, bank-linked payments can be adapted to fit different countries' regulations, banking systems, and user needs.
Stronger Together: When Governments Get Involved
UPI's success in India wasn't just about tech. The government's role in promoting it, building trust, and setting favorable policies was vital. Only this kind of collaboration between the tech sector and the government will be a winning formula elsewhere.
What Makes UPI a Global Contender?
Cost-Effective: Compared to legacy payment systems that rely on various intermediaries, UPI's direct bank-to-bank model is potentially cheaper and faster.
Inclusive: UPI was designed to work for a wide range of people. This focus on accessibility makes it a good fit for countries aiming to bring more people into the formal financial system.
Competition is Good: In markets dominated by a few big card networks, a UPI-style system will boost competition and give consumers more choices.
Note: It won't be a simple copy-paste job for other countries. Regulations, the existing banking landscape, and how people are used to paying for things will all factor into how UPI-inspired systems are adapted globally.
What Startups Can Learn from UPI
1. The Power of User-Centric Design
UPI became popular because it's dead simple to use.
Sweat the Easy Stuff: Yes, your product might have fancy features, but if the basics are confusing, people will ditch you. Focus relentlessly on making the core user flow as smooth as possible.
Know Your Audience: UPI's accessibility across ages and tech-savviness was key. Who are you actually building for? Design with their habits and needs at the forefront.
Security That's Not a Hassle: UPI builds trust without being overly complex. Find that balance between secure and user-friendly in your own product.
2. Finding the Right Partners
The government as a booster is unusual, but the concept applies broadly.
Don't Go It Alone: Who are the established players or influential organizations in your industry? Are there ways to collaborate that open doors and boost your credibility?
Policy Matters: Regulations make or break a tech product. Be engaged with the regulatory side of things, even if it's not as exciting as coding.
Credibility = Growth: Especially in the early days, trust is everything. Partnerships with recognizable names can lend you legitimacy.
3. Mobile Isn't an Option, It's the Foundation
India's smartphone boom fueled UPI. The lesson here is clear:
Apps that Shine: Even if you have a website, the mobile app experience needs to be top-notch. Sloppy apps kill growth.
Think Beyond the Big Cities: Are markets outside major urban centers an opportunity? Design solutions that work well even with slower internet connections.
4. Make a Difference, and Profit Will Follow
UPI boosted financial inclusion. This aligns with a broader startup trend:
Solving Real Problems: Can your product genuinely improve people's lives? This makes it easier to attract users AND passionate team members.
Underserved Markets are Huge: People who've been ignored by traditional systems are hungry for new solutions. Can you be the one to provide them?
5. Never Stop Evolving
UPI keeps adding features – credit card links, new ways to pay, etc.
Listen to Your Users: What do they want that you don't currently offer? Pay attention to feedback loops to guide your product roadmap.
Tech Changes Fast: Staying ahead means experimenting and being willing to integrate new technologies as they become relevant.
Building the next UPI is insanely hard. But, even if your startup has a smaller scope, the principles behind its success directly translate to building any successful tech product.
Now, it's your turn. What problems will your startup solve, and how will you apply the lessons of UPI to achieve your own success story?
For Startup Founders
Excited about implementing Product-Led Growth in your own startup? Here are a few things to consider:
Read up: Search online for resources like blogs, case studies, and even books focused on PLG strategy. (Here are three suggestions from me: The Lean Startup by Eric Ries, Product Led Growth Wes Bush and Hooked by Nir Eyal)
Find a Mentor If you can connect with someone who has experience in PLG implementation, it will be invaluable. (for example me 😜)
Don't be afraid to start small: You don't have to overhaul everything at once. Focus on specific areas where you can make a user-centric change
Want personalized guidance?
As someone who is passionate about Product-Led Growth, I'd be happy to discuss how I can help your startup with PLG strategy. Feel free to book a consultation with me – https://calendly.com/productgrowth/. Let's talk about how to unlock growth for your business!