From rupees to QR codes: how India went cashless

Sometimes when you’re in a country, some things can be so common that you get used to them. You forget that the thing might be unique to that country.

In Japan, for example, the prevalence of a particular type of convenience store every 100m is quite common in Japan. It’s not in other countries.

In the UK and other countries, I’ve been using contactless payment for over 10 years. The pandemic accelerated the move to cashless payments.

Some people prefer to use cash. Going cashless is complicated and can exclude sections of society.

India has moved towards cashless payments in a completely different and interesting way.

One of the issues with contactless payment is the need for a machine. The seller must have it for the buyer to swipe. Initially this was a barrier to entry because the swipe devices were expensive. Their prices have come down. Despite that, in some parts of the world, the new lower price of devices is still unaffordable.

India, in 2015, started developing a new system. In 2016, UPI (Unified Payments Interface) was launched. It has brought millions of previously unbanked people into the digital economy.

To use it, you need a bank account. For that bank account, you can create one or more UPI IDs. An ID takes this form abcdef@xyz. Typically, it is your mobile number followed by your bank, eg 123456789@bankname. You can also associate your mobile number with the bank account. To make payments, you need the other person’s UPI ID or phone number. They can tell you these. Alternatively, and this is what almost everyone does, you can scan a QR code. Almost every street vendor and shop has a card or poster with their QR code on it. Tuk tuk drivers either have a printed card or show you their QR code on their mobile phone.

In the early days, you had to use your banking app to scan the QR code. Now you can use many apps, such as Google Pay, Paytm, PhonePe, and even WhatsApp!

When you scan someone’s QR code, one of two things happen. Your app shows you the name of the person/company with the amount set to zero. You enter the amount to transfer, type your PIN, and tap send. Alternatively, for larger companies, the QR code encapsulates the company’s name and the amount for the transaction. This time you need to enter just your PIN to confirm payment.

The key is that money leaves your bank account only after you have accepted the transaction with a verification PIN.

This is slightly different from contactless payment where the seller always enters the amount to be paid. Another key difference is that in India the seller only needs a piece of paper with their UPI QR code. They don’t need a (relatively expensive) machine for you to swipe. There is a low barrier to entry with UPI for the seller. It’s the buyer who decides how to pay based on what they have. If they have a smartphone, they can use UPI. Otherwise, they can use cash or an alternative form of payment accepted by the seller.

More established companies have handheld machines that both generate QR codes for UPI and accept contactless payments.

UPI has revolutionised payments in India. In 2019, there were 1 billion transactions per month. In 2024, there were 10 billion per month. That’s an average of almost four transactions per person per month.

Everyone accepts UPI. Corporations, small businesses, and supermarkets accept it. Taxi drivers and street vendors take UPI too. Religious institutions and someone selling bananas on the corner do as well. Buses accept UPI. When the conductor comes, you scan the QR code on the bus. You tell the conductor where you’re going. They tell you the fare. I’ve even used UPI to pay to go to the toilet. This can cost as little as a few pennies (cents). The UPI system is so efficient, there is no minimum payment.

The government encouraged UPI adoption by offering various incentives. UPI has been so successful that it has been extended to other countries, such as UAE, Singapore, Nepal and Bhutan.

UPI continues to evolve. Feature phones (non-smartphones) can use UPI to increase financial inclusion. Small-value transactions can be done without requiring a PIN. Credit cards can back UPI payments. You can get an overdraft using UPI.

UPI, someone told me, has become an obsession with some people. They compare how many payments they’ve made using UPI!

Some people now refer to UPI as GPay. Google Pay is probably the most common way of using UPI. However, when people have asked me how I want to pay, saying “UPI” has always been understood.

Using UPI in India is easy if you have an Indian bank account. It’s technically possible for foreigners to use UPI but the process, someone told me, is more convoluted. It will no doubt become easier as demand increases.

The more I experience it, the more I admire it. It’s a perfect low-cost solution for India’s economy.

When I took the photos below, I told people what I was doing. It caused amusement — and sometimes bemusement — when I told them I was interested in the QR code!

All the photos below have a QR code for UPI payment. Can you spot the code?!