UPI: Anatomia de uma transação de pagamento(timeseriesofindia.com)
timeseriesofindia.com
UPI: Anatomy of a Payment Transaction
https://timeseriesofindia.com/economy/reads/upi-architecture/
50 comments
I have the utmost respect to people who makes UPI work. Made even the old people in the nation completely go digital for payments - a feat unparalleled in the world.
it worked because india never had credit card payments( at scale ) . they went straight from cash to digital payments.
What does this have to do with credit cards? India always had credit cards at a scale comparable to most countries, and they always were a regularly-used of payment for medium-sized "white" transactions; they just weren't that useful for day-to-day transactions in terms of most locals' ways of working where the actual India-level scale is, and not the primary way of transacting as in the US. And looking at how Visa and Mastercard work, and what they tried to do in Brazil, I think that's a great thing.
As GP says, you could _never_ get the older generation to use a credit card even when they had the means to do so. But they took to UPI just fine, and many now prefer it over cash.
Also, credit card issuance and acceptance in India is growing quite a bit right now, despite (because?) of UPI.
As GP says, you could _never_ get the older generation to use a credit card even when they had the means to do so. But they took to UPI just fine, and many now prefer it over cash.
Also, credit card issuance and acceptance in India is growing quite a bit right now, despite (because?) of UPI.
Most mom and pop stores (Kirana stores) in India cannot get a PoS device easily. UPI solves this problem by being much easier for merchants to onboard and start accepting payments with just a QR code instead of a PoS device.
Great article. I would love to see a similar article about how POS credit card / debit card payments work in the US/Europe, depending on whether you use the card's magnet stripe, chip or your phone (Apple Pau/Google Pay/…) to pay.
22B transactions a year mean an average of ~700 QPS for the NPCI switch. Of course the traffic is not uniform, it probably peaks at many times that number, but that still doesn't sound that bad - for comparison, a quick Google tells me Nasdaq TotalView ITCH feed peaks at 100k+ QPS at market open.
The right comparison for Nasdaq's order processing volume or messaging volume would be India's National Stock Exchange (NSE). It does more executed orders per day than nasdaq.
I worked on scaling UPI a few years ago. Real-time Payments is vastly more complex as it is much more distributed - each transaction involves the two banks holding funds, two end-user apps (and their banks), and the network (npci) – for the payment to complete end to end, multiple message exchanges need to happen between these parties while the user at both ends are waiting. So, if you measure the scale in messages/sec it would 10-25x higher.
Real-time payment rails that works 24/7 365 days a year from any bank to any bank (domestic, no exceptions) for free is truly a game-changer. Compare that to US payment rails which is slow and expensive. Apart from UPI, India has 3 more payment rails – NEFT (similar to ACH – batch settlement), IMPS (similar to UPI, instantaneous - but different user experience), RTGS (real-time, intermediated by the central bank RBI, but only for high-value transactions) – all are 24/7/365 and free. Then, there's credit card rails – apart from Visa and Mastercard, India also has RuPay which has much lower interchange rate.
I worked on scaling UPI a few years ago. Real-time Payments is vastly more complex as it is much more distributed - each transaction involves the two banks holding funds, two end-user apps (and their banks), and the network (npci) – for the payment to complete end to end, multiple message exchanges need to happen between these parties while the user at both ends are waiting. So, if you measure the scale in messages/sec it would 10-25x higher.
Real-time payment rails that works 24/7 365 days a year from any bank to any bank (domestic, no exceptions) for free is truly a game-changer. Compare that to US payment rails which is slow and expensive. Apart from UPI, India has 3 more payment rails – NEFT (similar to ACH – batch settlement), IMPS (similar to UPI, instantaneous - but different user experience), RTGS (real-time, intermediated by the central bank RBI, but only for high-value transactions) – all are 24/7/365 and free. Then, there's credit card rails – apart from Visa and Mastercard, India also has RuPay which has much lower interchange rate.
None of them are free, most banks now charge nominally (look at NEFT and IMPS charges). UPI itself is paid off by taxpayers.
Also RTGS is the only ISO 20022 complaint payment rail (back when it wasn't globally very common) - something that needs to be appreciated more.
People need to realise what NPCI offers is vastly different from what RBI offers. In my opinion what NPCI is offering will end up negatively impacting the general population in the long run.
Also RTGS is the only ISO 20022 complaint payment rail (back when it wasn't globally very common) - something that needs to be appreciated more.
People need to realise what NPCI offers is vastly different from what RBI offers. In my opinion what NPCI is offering will end up negatively impacting the general population in the long run.
NEFT and RTGS are free if you do it online. UPI (which itself runs on IMPS rails) is free. Many banks waive off IMPS charges.
NEFT and RTGS were introduced in the mid-2000s. IMPS in 2010, UPI in 2016. It's been > 10 years since the latest instrument launch. Enough time for "long term" impacts to show up.
If anything, the impact has been overwhelmingly positive.
NEFT and RTGS were introduced in the mid-2000s. IMPS in 2010, UPI in 2016. It's been > 10 years since the latest instrument launch. Enough time for "long term" impacts to show up.
If anything, the impact has been overwhelmingly positive.
Just for my curiosity, why do you think "what NPCI is offering will end up negatively impacting the general population in the long run."
I would guess NPCI being a private body with transaction charges being borne by the Indian government is a net negative in the long run. It costs everyone. NEFT and RTGS on the other hand is RBI regulated with clear pricing and costs only those involved. The cost structure needs to change, but then, it won’t be possible. To pay 5 rupees for a chocolate with your phone and get even 0.5 added on top would make the consumers switch to cash almost immediately.
NPCI is a public sector company with partial ownership between 46 banks. Its costs is trivial compared to savings and efficiency it brings in overall system. Cash handling is very costly for entire chain. Printing by RBI, its logistics by banks and handling by vendors.
Apart from that it is formalization of informal economy, govt has better visibility, tax evasion is difficult and people outside financial services can now use it.
Also, like Rupay has charging for transactions abover a certain threshold of value like 10000 will cover some of the costs without reducing the incentive of system.
Think of vaccines, small cost for big savings elsewhere.
Apart from that it is formalization of informal economy, govt has better visibility, tax evasion is difficult and people outside financial services can now use it.
Also, like Rupay has charging for transactions abover a certain threshold of value like 10000 will cover some of the costs without reducing the incentive of system.
Think of vaccines, small cost for big savings elsewhere.
AFAIK banks don't charge for NEFT transfers when initiated via their mobile app or Internet banking website. Fees apply only when you do it via their physical branch.
22B in the month of June 2026, so 264B extrapolated annually.
Yep. Here's the accurate Month-to-date stats published daily by the network operator NPCI https://x.com/NPCI_NPCI. If you want official stats across all banks, across all payment rails, look at the central bank (RBI)'s website.
They put out a lot of useful stats here https://www.rbi.org.in/Scripts/Statistics.aspx
Daily payment settlement stats here: https://rbidocs.rbi.org.in/rdocs/content/docs/PSDDP04062020....
They put out a lot of useful stats here https://www.rbi.org.in/Scripts/Statistics.aspx
Daily payment settlement stats here: https://rbidocs.rbi.org.in/rdocs/content/docs/PSDDP04062020....
~8.8K TPS on average
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A great lesson for system design job interviews - if this is a popular payment system in a country with 1.5 billion people, your theoretical system you're designing for a small company cargo culting Google interviews will not likely support millions or even tens of thousands of average TPS.
Well, they are money-moving transactions which means each person only does them a few times per day. If your system's transactions are more like showing the weather on the home screen, it's plausible you could have orders of magnitude more traffic than a payment system.
Centralized, kyced, private money transaction network. Is this something good?
It’s extremely good, at least in terms of user experience and how practical it is. Adoption is massive and at small chai shops it makes transactions a breeze, allowing businesses to serve more volume. The downside is making it incredibly frustrating for foreigners to pay using this as it’s tied to your government ID that your bank has authorized.
I mean it's not like foreigners are blocked from using cash at those stores. And if they prefer cards, it's not like the stores that used to accept them stopped accepting them.
Most places will not have change so you need to carry exact cash change all the time. And many are indeed stopping using cards and switching to UPI as the fees are much less, unless they are particularly foreigner friendly, like a hotel in a tier 1 city.
In fact, card acceptance has gone _up_ in my experience. Unless you're using a very small shop which just has a QR code, most businesses now use a POS which supports a lot of payment methods including cards.
I agree that a lot of businesses now actively don't manage cash as they used to earlier... it's very difficult to get low-value notes as the central bank seems to be slowly reducing the supply by not printing as per demand.
I agree that a lot of businesses now actively don't manage cash as they used to earlier... it's very difficult to get low-value notes as the central bank seems to be slowly reducing the supply by not printing as per demand.
way better than privately owned banks doing the same while extracting profits from users. better than todays crypto with terrible ux where its easy to lose all your money. more practical than cash (but that should still be an option).
worse than a system thats convenient and decentralized and anonymous at the same time, but we dont have one yet. maybe in 5 years when ethereum figures out native account abstraction, seamless scaling and monero level privacy.
worse than a system thats convenient and decentralized and anonymous at the same time, but we dont have one yet. maybe in 5 years when ethereum figures out native account abstraction, seamless scaling and monero level privacy.
Yes it is. It's not trying to be new money, it's your money that already works.
That's how government money works. This is the best possible system for handling government money. If you want an alternative you could buy some bitcoin with it.
It's the CBDC that govts lust for.
I have heard nothing but good about it, from my Indian friends. They rave about it.
Yes, it is peak developed world financial infrastructure, ran as a utility under government direction.
> Is this something good?
All good for a central bank digital currency (CBDC) and for creating the digital rupee.
Horrible for your bank account.
All good for a central bank digital currency (CBDC) and for creating the digital rupee.
Horrible for your bank account.
> Horrible for your bank account
Why? Are you saying that people spend much more because upi has made spending so easy?
Why? Are you saying that people spend much more because upi has made spending so easy?
How is it KYCd yet also private?
It's the intention and use case. The government want to reduce the fund leakages and reduce corruption, directly transfer the money to citizens, reduce transaction costs. Hence it works.
The government does not track all the transactions. You need a police FIR, to review these transactions.
In short, Indian government does not track or they don't have the scaling to track. But they can do it, if there is any criminal complaint.
The government does not track all the transactions. You need a police FIR, to review these transactions.
In short, Indian government does not track or they don't have the scaling to track. But they can do it, if there is any criminal complaint.
> In short, Indian government does not track or they don't have the scaling to track
This is completely wrong.
Not only can the Indian govt track each these transactions, it's actually written into law via the 'anti money laundering' bill (PMLA) and the income tax act. For a very high level overview, see https://www.bankbazaar.com/tax/tax-on-upi-transactions.html
From the article
'Can the Income Tax Department Track Your UPI Transactions?
Yes. With the integration of PAN, Aadhaar, and Know Your Customer (KYC) via all banking and fintech channels, all your UPI transactions can be tracked. If you think your small-value digital transfers won't be traced, you are mistaken. UPI payments are directly linked to your bank account, and bank records can be obtained by tax officers through scrutiny or reassessment.'
Specifically, no complaint or warrants are needed to enable access to UPI transaction records.
This is completely wrong.
Not only can the Indian govt track each these transactions, it's actually written into law via the 'anti money laundering' bill (PMLA) and the income tax act. For a very high level overview, see https://www.bankbazaar.com/tax/tax-on-upi-transactions.html
From the article
'Can the Income Tax Department Track Your UPI Transactions?
Yes. With the integration of PAN, Aadhaar, and Know Your Customer (KYC) via all banking and fintech channels, all your UPI transactions can be tracked. If you think your small-value digital transfers won't be traced, you are mistaken. UPI payments are directly linked to your bank account, and bank records can be obtained by tax officers through scrutiny or reassessment.'
Specifically, no complaint or warrants are needed to enable access to UPI transaction records.
Yeah globemaster99's point seems very naive.
> In short, Indian government does not track or they don't have the scaling to track
This is completely wrong.
Not only can the Indian govt track each these transactions, it's actually written into law via the 'anti money laundering' bill (PMLA) and the income tax act. For a very high level overview, see https://www.bankbazaar.com/tax/tax-on-upi-transactions.html
From the article
'Can the Income Tax Department Track Your UPI Transactions?
Yes. With the integration of PAN, Aadhaar, and Know Your Customer (KYC) via all banking and fintech channels, all your UPI transactions can be tracked. If you think your small-value digital transfers won't be traced, you are mistaken. UPI payments are directly linked to your bank account, and bank records can be obtained by tax officers through scrutiny or reassessment.'
Specifically, no complaint or warrants are needed to enable access to UPI transaction records.
This is completely wrong.
Not only can the Indian govt track each these transactions, it's actually written into law via the 'anti money laundering' bill (PMLA) and the income tax act. For a very high level overview, see https://www.bankbazaar.com/tax/tax-on-upi-transactions.html
From the article
'Can the Income Tax Department Track Your UPI Transactions?
Yes. With the integration of PAN, Aadhaar, and Know Your Customer (KYC) via all banking and fintech channels, all your UPI transactions can be tracked. If you think your small-value digital transfers won't be traced, you are mistaken. UPI payments are directly linked to your bank account, and bank records can be obtained by tax officers through scrutiny or reassessment.'
Specifically, no complaint or warrants are needed to enable access to UPI transaction records.
> You need a police FIR, to review these transactions.
In India, if you even have a small power you can easily review any transactions...
In India, if you even have a small power you can easily review any transactions...
I think OP meant network is private. That also is wrong, it is semi govt.
Maybe for some but likely not all
How is this different from Alipay/WeChat Pay in China? Handling transactions of this volume is an amazing technological feat, kudos to the team! However, I don't think this mobile QR code paying system is anything novel. Alipay rose to popularity much earlier (I can't recall exact when, but it was already super popular in ~2010, and definitely ubiquitous by 2015).
It’s a completely different backend model; as far as I know alipay works just like PayPal where transactions are fully “internal” - the buyer pays Ant Group and the seller cashes out at a later date.
UPI is a real inter-organization payment system more akin to credit card processing, where fund requests flow from the payer, through a payer processor, through a merchant processor, and finally to their end destination, and the actual reconciliation happens through a bank transfer system. It’s a much less centralized system.
UPI is a real inter-organization payment system more akin to credit card processing, where fund requests flow from the payer, through a payer processor, through a merchant processor, and finally to their end destination, and the actual reconciliation happens through a bank transfer system. It’s a much less centralized system.
UPI is more like a routing/reconciliation layer like VISA that can work across any bank/wallet, and that core is run by a non-profit government org. It doesn't take custody of the funds and doesn't centralize the information into a private corporation. The fee is also minimal and flat-rate with no profit incentive, instead of paying a percentage of the entire countries transaction volume to some private company. I would guess that adds up to a huge amount of money saved overall.
Much of the world doesn’t like having a single entity own and control the process end to end, it’s more efficient but there’s only one point of trust. Multiple institutions that have to check each other means you don’t have to trust a single entity with everything.
The main difference is that the core API is public infrastructure (run by a government authority). The apps are run by different companies but the backbone is interoperable by design
Alipay is the usual deal with a single company’s server and then they settle those later. Relatively basic compared to this.
I like the article but “ Bricolage Grotesque” and the claude background colour just puts me off.
Why? It looks pleasant.
UPI is fantastic software and the pride of great software engineering from India.
Excellent engineering.
I only wish more countries would implement something like UPI in other countries and get rid of inferior and broken solutions like crypto.
Excellent engineering.
I only wish more countries would implement something like UPI in other countries and get rid of inferior and broken solutions like crypto.
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