January 22, 2025 · 11 mins read
Santosh Kumar
Unified Payments Interface (UPI). Launched in 2016 by National Payments has transformed the way individuals in India conduct transactions and manage their finance. Corporation of India (NPCI), UPI has very rapidly scaled in terms of adoption and transaction volumes. There are lots of services that facilitate online money transfer between two parties using a smartphone, the Unified Payments Interface (UPI) in India being one of the largest in operation today. The new generation of payment systems enabled by the innovative use of this method can be much more accessible and efficient, especially for emerging markets and developing countries. Increasingly, the Indian citizens are adopting this revolutionary payment technology and driving the country forward in the digital age with remarkable speed and success as UPI continues its evolution.
To grasp the magnitude of daily UPI transactions, it’s essential to understand its growth trajectory. UPI began with modest transaction volumes in 2016, but by 2024, it has become the backbone of digital payments in India. Key reasons for its growth include:
User-Friendly: UPI is user-friendly and easy to onboard for individuals at every age.
Interoperability: UPI text allows for frictionless transactions across differing banks and payment service providers.
Government Drivers: Initiatives such as Digital India have promoted to bring citizens onto digital platforms.
Zero/Minimal Charges: Most of the UPI transactions are free.
Universality: UPI is accepted everywhere from small street vendors to large enterprises.
As of 2024, the volume of daily UPI transactions has surpassed 500 million transactions per day. This staggering figure highlights the widespread adoption and trust in the system. To put this in perspective:
2016: Daily transactions were in the hundreds.
2018: UPI crossed 1 million daily transactions.
2020: Daily transactions grew to around 100 million, driven by the COVID-19 pandemic.
2024: The system processes over 500 million transactions every single day.
The value of these transactions is equally remarkable, often exceeding ₹30,000 crores daily. These numbers not only signify the popularity of UPI but also its ability to handle such high transaction volumes efficiently.
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Several entities contribute to the functioning and growth of UPI. These include:
There are multiple players behind the scenes that help the functioning and growth of UPI. These include:
Banks sit at the center of the UPI ecosystem, enabling transactions between one account and another. Banks like SBI, HDFC, ICICI and Axis Bank handle millions of UPI payments every day.
UPI would not have become this popular without payment applications like Google Pay, PhonePe, Paytm, and BHIM UPI. As of 2024:
1: PhonePe accounts for the largest share of UPI transactions.
2: Google Pay and Paytm are close competitors, each processing billions of transactions monthly.
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The National Payments Corporation of India (NPCI) governs and oversees the UPI infrastructure, ensuring its smooth functioning and scalability.
The impressive daily transaction volume of UPI is driven by multiple factors:
Topics such as higher education digital payment systems - Awareness and Understanding.
The rise of cost-effective smartphones and inexpensive data packages have made UPI services available to even rural audiences.
PM Jan Dhan Yojana And Direct Benefit Transfers (DBT) programmes have also made acceptance of UPI a part of citizens’ lifestyle.
The growth of UPI was catalyzed by demonetization in 2016. The government's relentless drive for a cashless economy
The ability to transact 24/7 with enhanced security features has made UPI the preferred choice for millions.
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UPI provides the following two types of transactions:
Since its beginning, when payments volumes were dominated by person-to-person (P2P) transactions, person-to-merchant (P2M) now represents a significant part of daily transactions thanks to the increasing adoption by merchants.
UPI is not restricted to urban areas, as commonly believed. UPI adoption in rural areas is also growing fast due to localized solutions and targeted efforts.
One significant trend seen here is about the increasing micro-transactions (payments below ₹100). Payments for groceries, utility bills, and public transport are among them.
Recurring payments—such as those through UPI AutoPay—have made it easier for consumers for subscriptions, loans, and insurance, contributing to daily transaction volumes.
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The UPI transaction limit per day is set at ₹1 lakh by the National Payments Corporation of India (NPCI). For UPI 123Pay, the per-transaction limit is ₹10,000. Users are also restricted to a maximum of 20 UPI transactions in a single day.
For specific transactions, higher UPI transfer limit of ₹5 Lakh is applicable, such as:
1: Tax payments
2: Payments to educational institutions and hospitals
3: IPO applications
4: Payments to RBI’s retail direct schemes
It’s important to note that these UPI transfer limits can vary between banks, with some institutions offering daily transfer limits ranging from ₹25,000 to ₹1 lakh. Additionally, certain banks may impose weekly or monthly limits instead of daily ones.
As of April 2024, UPI payments in sectors like capital markets, foreign remittances, and insurance have a ₹2 lakh daily limit. For verified merchants in education and healthcare, the UPI limit is extended to ₹5 lakh per day.
If you exceed these limits, you’ll need to wait for the 24-hour cycle to reset before making further transfers.
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UPI charges depend on the type of transaction and the merchant category Bank account-to-bank account (B2BA) transactions are free for customers an merchants.
Person-to-merchant (P2M) transactions are free for customers for up to Rs. 2,000. For transactions above Rs. 2,000, an interchange fee of 1.1% is charged to the merchant. The merchant pays the interchange fee to the payment service provider (PSP), which is the company that facilitates the UPI transaction.
Merchant-to-merchant (M2M) transactions are also free for customers. However, an interchange fee of 0.5% is charged to the merchant for all M2M transactions.
The interchange fee is a standard fee for all payment transactions. It covers the costs of operating the payment system and providing customer support. The interchange fee is not a profit for the PSPs.
It is important to note that the UPI charges may vary depending on the bank and the PSP. It is always best to check with your bank or the PSP for the latest charges.
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1. Introduction of higher UPI transactional limit: According to RBI during the October 9, 2021, the maximum individual transaction limit for UPI 123 Pay was raised from Rs. 5000 to Rs.10000. This would enable feature phone users to transact in considerably higher amounts with more ease in Nigeria.
2. Increase in UPI Lite UPI Recent Developments And Changes Wallet Limit: The UPI Lite wallet daily transaction limit was also raised from Rs. 2000 to Rs.5000 on October 9, 2021. This adjustment intends to assist in the ease of performing more small value and low cost transactions thanks to increased limit.
3. Introduction of competition: In order to prevent anti-competitive behaviour within the UPI ecosystem, NPCI has suggested a limit of 30% on the volume of transactions handled by a specific UPI application. This limit has been put in place to encourage competition among Third Party App Providers (TPAPs). The deadline for implementation of this limit has been pushed forward to the end of this year.
4. Interchange Structure: Interchange fees will apply to merchants conducting operations on UPI of more than Rs. 2000 through PPIs at the rate of 1.1%. The intention of this fee is to aid clear the costs that have been utilized in order to perform transaction authorizations and its processing.
5. Small transactions done by small merchants are exempt: In a bid to encourage small businesses, there will be no application of the interchange fees to small merchant transactions concluded at Rs.2,000. This exemption intends to promote the adoption of UPI payment by more merchants without bearing any additional expenses.
The interchange fee, typically up to 1.1%, is paid by the merchant for UPI transactions over ₹2,000 made through PPIs. This fee is collected by the payer’s bank from the merchant’s account to cover transaction processing costs.
As a customer, you will not be charged for UPI payments made through PPIs for P2P or P2M transactions, nor will you pay any extra fees when topping up a wallet.
Despite its success, UPI faces several challenges:
1. Technical Glitches: The sheer volume of daily transactions can strain servers, leading to occasional downtimes or failed transactions.
2. Fraud and Scams: As with any digital platform, UPI is vulnerable to phishing, fraudulent apps, and other scams. Educating users about these threats is crucial.
3. Digital Divide: While adoption is growing in rural areas, a significant digital divide still exists, hindering universal UPI access.
4. Merchant Charges: Debates around imposing charges on UPI transactions for merchants could impact its growth trajectory.
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UPI is likely to achieve even better accomplishments, based on the present course it is taking. There are some predictions for the future as follows:
1: International Growth Expansion of UPI has already begun in the foreign territories. Countries like Singapore and UAE have already started accepting UPI payments from people traveling and residing in India.
2: Increase in Transaction Volumes UPI is expected to handle over 250 million users reviewing the current trend. With these innovations and wider user base, expected daily transactions over UPI could cross 1 billion mark by 2030.
3: Adoption of Future Technologies There are technologies like blockchain and artificial intelligence which could come handy in increasing UPI’s productivity and security.
4: Addition of Functionalities NPCI intends to launch UPI credit and UPI offline payment features which will serve a wider range of audience and use cases.
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Making payments through UPI comes with restrictions on daily limits. This makes individuals wait for the next day to perform transactions. They can use other payment mediums. The NPCI has not yet increased the transaction limit, and the bank cannot increase the transaction limit, even after requesting.
With more UPI transactions, there is a possibility that the NPCI will consider increasing the transaction limits and transaction amount in the upcoming days. NPCI has allowed banks to set their transactions limit. The limit cannot cross the 1,00,000/- limit cap set by the NPCI.
What is the maximum amount for a UPI transaction?
For P2P transfers and most merchant payments, it's ₹1 Lakh. For P2M transactions like credit card or loan payments, it's ₹2 Lakhs.
How many UPI transactions can I make daily?
You can make up to 20 transactions in 24 hours, though this may vary by bank.
Can I change or increase my UPI transaction limits?
No, the daily limits are set by the government and cannot be altered by users.
What security measures protect UPI transactions?
1: Verify UPI IDs before paying.
2: Never share your UPI PIN or use it to receive money.
3: Check SMS alerts after transactions and report discrepancies.
4: Use the UPI app's help section for support.
Are UPI transactions free?
Yes, as of October 2023, UPI transactions are free of any charges or hidden fees.
What is the UPI daily transaction limit?
It’s ₹1 Lakh per day, as per NPCI guidelines.
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