What began as a pilot project in April 2016 with 21 banks and a few hundred transactions,has grown into the world’s largest real-time payments system. By FY 2025-26, UPI processed over 24,162 crore transactions worth approximately Rs 314 lakh crore, accounting for nearly 85% of India’s digital payments and almost 49% of global real-time payment volume.This extraordinary journey is inseparable from the policy vision, regulatory support and political push provided by the Narendra Modi government since 2014. UPI is not merely a technological success; it is one of the most effective examples of Digital Public Infrastructure (DPI) delivering tangible economic inclusion at population scale.
Growth was steady but not yet explosive. However,from roughly 2 crore transactions in FY 2016-17, volumes rose to several billion by FY 2019-20. Private players such as PhonePe and Google Pay (then Tez) entered the market, competing on user experience while riding the same interoperable NPCI rail. This open architecture,a deliberate design choice, prevented monopolies and accelerated innovation.
The real inflection point came in January 2020. The government mandated zero Merchant Discount Rate (MDR) on UPI Person-to-Merchant (P2M) transactions funded from bank accounts, as well as on RuPay debit cards. This decision removed the last barrier for small merchants. A roadside vendor or kirana store could now accept digital payments by simply displaying a QR code, free of cost.The impact was dramatic. During the COVID-19 pandemic, when physical cash handling became risky, UPI volumes nearly doubled year after year. By FY 2022-23, the number of transactions crossed 83 billion; by FY 2025-26 they exceeded 241 billion. Daily averages reached around 66 crore transactions. The number of banks live on UPI grew from 21 to over 700. User onboarding crossed 55 crore.
UPI 2.0 (2018) added overdraft accounts, one-time mandates and invoice details.UPI AutoPay enabled recurring payments for subscriptions, EMIs and utilities.UPI Lite allowed offline low-value transactions.Credit Line on UPI and RuPay credit cards linked to UPI expanded the product suite.UPI 123PAY brought feature-phone users into the fold. International expansion began in the early 2020s. By mid-2026, UPI was operational in many countries including Singapore, UAE, France, Mauritius, Nepal, Bhutan, Sri Lanka, Qatar, Cambodia and Greece, allowing Indian travellers to pay by scanning local QR codes.
Visa and Mastercard operate proprietary closed-loop networks. When a customer pays with a Visa or Mastercard debit or credit card, the merchant pays a Merchant Discount Rate (MDR). This fee typically ranges from 0.90% to 1.5% for debit cards and 1.5–3.75% or even higher for credit cards, depending on merchant category, card type and ticket size. The MDR is shared among the issuing bank, the acquiring bank, the card network (Visa/Mastercard) and the payment gateway. Merchants often pass this cost on to consumers through higher prices or convenience fees. Settlement usually takes T+2 or T+3 days.
UPI, by contrast, is built on an open, interoperable public infrastructure. The fundamental difference between UPI versus Visa or MasterCard lies in the business model and regulatory philosophy.Since January 2020, bank-account-funded UPI P2M transactions carry zero network MDR. The Modi government and RBI deliberately subsidised the ecosystem through incentive schemes so that neither the consumer nor the merchant pays a transaction fee for standard payments. Settlement is near-instant (usually within seconds). Payment gateways may still levy a small technology or platform fee sometimes, but the core network cost is absolutely zero. UPI is absolutely free, safe and secure,making it unique.
This zero-MDR policy by the Modi government was a conscious political and economic choice. It treated digital payments as a public good rather than a pure commercial product in the initial scaling phase. The result—massive adoption among micro and small merchants who would never have accepted expensive card terminals and a frictionless experience for hundreds of millions of users.In August 2026, the Modi government introduced the Taxation and Other Laws (Amendment) Bill, 2026. One of its provisions amends Section 10A of the Payment and Settlement Systems Act, 2007. Previously, the law effectively barred charges on certain digital modes linked to the Income Tax Act’s Section 269SU. The amendment gives the Central government power to notify which electronic payment modes may attract charges (including MDR). However,end users and consumers will not be charged for using UPI.Person-to-Person (P2P) transfers remain completely free.Any future MDR, if introduced at all, is expected to apply only to a very limited set of merchant transactions,typically large merchants and higher-value payments (for example, above Rs 2000). Rates, if levied, at all,would be very nominal (industry speculation points to 0.2–0.3%) and far lower than debit or credit card MDRs.The vast majority of current UPI transactions (especially small-ticket and small-merchant ones) will remain free, as always.Final decisions will involve the NPCI-led UPI and Services Steering Committee after the legislative process is complete.
Critics worry that even selective MDR could discourage some merchants or lead to indirect costs. Supporters argue that a well-designed, tiered structure protecting small merchants and low-value transactions while allowing reasonable recovery on high-value corporate payments,is necessary for long-term health. To cut to the chase,the Parliamentary Standing Committee on Finance has already reiterated that UPI was free, is free and will continue to be free for all P2P transactions. No decision has yet been finalised on MDR restoration for high-threshold transactions or a tiered incentive structure. So the controversy around MDR is simply a concocted one.
The result is not just convenience. UPI has formalised large parts of the informal economy, improved tax compliance through digital trails, reduced cash logistics costs and given India a powerful soft-power tool in the form of exportable digital public infrastructure (DPI). Several countries are now studying or adopting elements of the India Stack model.UPI in its 10th year stands at important crossroads. The first decade was about achieving unprecedented scale and inclusion. The second decade must focus on sustainability, resilience against fraud prevention, deeper credit and financial services integration and measured global expansion.The two features that made UPI revolutionary–it is free for ordinary users and small merchants and secondly, it remains fully interoperable. The world is watching UPI and increasingly trying to learn from what has clearly been a defining milestone under PM Modi,in empowering India’s digital public infrastructure.
Suffice to say that UPI’s success rests on several interlocking factors that the Modi government consistently prioritised–Public digital infrastructure treated as a national asset rather than a private monopoly. Interoperability has been enforced from day one.Zero or near-zero cost during the critical adoption phase has paid rich dividends. Regulatory agility combined with political ownership has ensured accountability. Integration with existing public systems (Aadhaar, Jan Dhan, DBT),has been a huge catalyst in UPI’s phenomenal trajectory.The next chapter of UPI can be as transformative as the first. India’s digital payments’ story under the Modi government already ranks among the most successful public-policy innovations of the 21st century.
Ms Sanju Verma is an Economist, National Spokesperson for BJP and Bestselling Author of “The Modi Gambit”.