A STUDY ON CUSTOMER PERCEPTION TOWARDS UPI AND

ITS GROWING INFLUENCE IN THE REALM OF DIGITAL

PAYMENTS: AN EMPIRICAL STUDY”
* Radhika Arora

Abstract :
The last decade has seen tremendous growth in use of internet and mobile phone in India. UPI has been
a trendsetter in our country which is moving towards a digital and a cashless economy especially after
the demonetization initiated by our Prime Minister in 2016. Increasing use of internet, mobile
penetration and government initiative such as Digital India gave birth to UPI (Unified Payment
Interface), an interface which is superior to digital wallets. Unified Payment Interface (UPI) is a
system that powers multiple bank accounts onto a single mobile application platform (of any
participating bank). It allows seamless fund transfers without CVV numbers hence is more secure.
Several consumer transactions are being made at point of sale (POS) terminals each day. The mode of
payment for most of these purchases is either through internet banking or mobile banking using smart
phone and a payment mode which is non-cash. The paper attempts understand the workflow of UPI vs
Digital wallets and measure the customer perception and acceptance of UPI based applications such
as BHIM. It compares UPI mode of payment with other types of digital transactions.
Keywords : Cashless Transactions, Consumer Perception, Digital Payment, Digital Wallets, Virtual
Payment Address (VPA)

INTRODUCTION beginning, e-wallets such as Paytm and

Unified Payments Interface (UPI) is an instant MobiKwik garnered major market share. There
real-time payment system developed by National are several digital payment modes in India they
Payments Corporation of India facilitating inter- are Online or mobile wallets, prepaid credit
bank transactions. It is based on the IMPS cards, Debit/RuPay cards, AEPS, USSD and
(Immediate Payment Service) protocol offered UPI.
by NPCI. Since the smartphone revolution in The banking industry also has had a variety of
India, without about 200 million people having payment products like NEFT (National
internet access in 2018, there is sharp increase in Electronic Funds Transfer), RTGS (Real-Time
various digital modes of payment. In digital Gross Settlement system), DD (Demand Drafts),
payments, payer and payee both utilize digital Cheques, IMPS (Immediate Payment Service),
modes to send and receive money. In the Net banking and Mobile banking. Yet it was

I Author:
Radhika Arora
Associate Professor
Centre for Management Studies
Presidency College

Adarsh Journal of Management Research (ISSN 0974-7028) - Vol. : 9 Issue : 1 March 2016 39
found that individuals required an easier and less complex approach to make payments. The
inability to address this need has removed individuals from the banking system and pushed them
towards digital payment modes, which are progressively getting to be increasingly popular. Here are
the different modes of digital payments in India today:
Online or mobile wallets: They are used via the internet and through smartphone applications.
Money can be stored on the app via recharge by debit or credit cards or net-banking. Consumer
wallet limit is Rs. 20,000 per month and the merchant wallet limit is Rs. 50,000 per month after
self-declaration and Rs. 100,000 after KYC verification.
Prepaid credit cards: Pre-loaded to individual’s bank account. It is similar to a gift card; customers
can make purchases using funds available on the card -and not on borrowed credit from the bank.
Can be recharged like a mobile phone recharge, up to a prescribed limit.
Debit/RuPay cards: These are linked to an individual’s bank account. It can be used at shops, ATMs,
online wallets, micro-ATMs, and for e-commerce purchases. Debit cards have overtaken credit
cards in India. The number of debit cards in December 2015 increased to 630 million compared to
22.75 in 2014.
AEPS: The Aadhaar Enabled Payment System uses the 12-digit unique Aadhaar identification
number to allow bank-to-bank transactions at PoS. AEPS services include balance enquiry, cash
withdrawal, cash deposit, and Aadhaar to Aadhaar fund transfers.
USSD: Stands for Unstructured Supplementary Service Data based mobile banking. It is linked to
merchant’s bank account and used via mobile phone on GSM network for payments up to Rs. 5,000
per day per customer.
As of December 2017 the UPI has grown from 0.9 billion in December 2016 to 96.4 billion in
December 2017, this shows the incremental growth of UPI in India. Unified Payment Interface
(UPI) transactions had shot up to 620.17 million in December 2018, up 18% from 524.94 million in
the preceding month. The total count for 2018 reportedly stands at 3 billion. It has grown in value
seven times over the corresponding month in 2017. Also, there is an impressive25% month to
month increase in transactions and we have crossed the 1 lakh crore transactions milestone as of
2018 for the first time. Below is a graph 1 on how exponentially the digital payments have grown
post demonetization.

Graph 1
Adarsh Journal of Management Research (ISSN 0974-7028) - Vol. : 12 Issue : 1 Sep 2018 - Sep 2020 40
However, with government’s introduction of to help them to understand the payment system
the BHIM app, a UPI based application, along with this creating awareness about the
transactions are increasing as compared to system. The infrastructure of UPI will provide
other electronic modes. low-cost acquisition infrastructure by allowing
So what is UPI and why is it superior to e- smart phones to substitute costlier point of sale
wallets? The United Payments Interface (UPI) (PoS) devices (Rajiv Anand, 2016). The USSD
envisages being a system that powers multiple support system allows non-smart phone users
bank accounts onto a single mobile application to do transactions (Harshit, 2017). Even
platform (of any participating bank). It merges without an internet connection also UPI
multiple banking features, ensures seamless payments are supported via USSD protocol
fund routing, and merchant payments. It which is useful for rural and non-smart-phone
facilitates P2P fund transfers. UPI is Open customers.
Source, Secure, Cheap, Simple to use and OBJECTIVES OF THE STUDY
Adaptable. UPI has a versatile framework • To understand both UPI system and other
which permits moving cash in a simple hassle payment modes.
free manner, 24 X 7, 365 days a year including
bank holidays. It is also faster than e-wallet • To assess the consumer perception towards
transactions. digital payment applications.
LITERATURE REVIEW • To analyze the factors that influences the
use of various digital payment modes.
In recent years, tremendous changes have taken
place in the financial sector in India which has • To compare the UPI system with other
lead to the transformation from cash payment modes.
transactions to cashless transaction (Singh & RESEARCH METHODOLOGY
Verma, 2016). The consumer’s awareness is
The study was conducted in Bangalore City in
growing day-by-day towards mobile payments
May/June 2018 with a sample size of 100. The
due to the potential of digital-payment methods
study tries to assess the customer attitude and
(Woodward, 2016).
perception towards digital payments and UPI
With UPI, the distinctive feature is that a interface and identify the security gaps in the
customer can make the amount transferrable different modes of payments.
between banks, not to the wallet and can use
ANALYSIS AND RESULTS
multiple bank accounts (Rajawat, 2017). Doing
payments via mobile phones has been in use The study’s most important finding is that
for many years and is now set to explode about 45% of the respondents believe that UPI
(Dalberg, 2008). Digital wallet offers many based digital transactions are safer and more
benefits while transferring money such as secure than other forms of digital payments.
convenience, security and affordability [8]. This clearly substantiates the growing
perception that UPI based apps are superior to
However, there is a study by (Dorothy
e-wallets.
Sagayarani 2017) which says that large part of
population of India does not use this digital The study also shows that about 35% of the
systems as they don’t know how to use it, so respondents are most concerned about security
there should be programs organized to help while doing digit transactions while the least
people mostly in rural area and the old people concern is for merchant acceptance which is

Adarsh Journal of Management Research (ISSN 0974-7028) - Vol. : 12 Issue : 1 Sep 2018 - Sep 2020 41
only 8%. The poor internet connection cash or credit card and it is interesting to note
accounts for 23% while lack of technical that the least important is “shortage of cash”.
knowledge is also 23 %. Secondary data So it can be inferred that unavailability of cash
reveals that the last two reasons that have bee is not the major factor for using digital
cited i.e. poor internet connection and lack of payments but it has definitely been a trigger
technical knowledge is more specific to Indian since the number of transactions went up
respondents. drastically post demonetization as you can see
From the study it is clear that after from the graph 1.
demonetization, in Nov 2016, the number of Study shows that the merchants and even the
people using digital transactions has increased banks are giving incentives and rewards for
sharply and now up to 80% of the respondents doing digital transactions. This has contributed
are using it regularly while only 20% of the to the increase in volume these transactions
respondents are not using the digital mode. especially among the millennials who are quite
Among the popularity survey of digital online savvy usually so for them it is a win-win
payment methods the highest number of situation.
respondents have given UPI rank 1, rank 2 to The study shows that as far as awareness
e-wallets, rank 3 to netbanking and the least regarding digital payments is concerned,
number respondents have given rank 1 to e- Net-banking has the highest awareness level
wallets. So the inference is that while e-wallets with about 68% followed by respondents and
are currently being used by respondents, they the least aware mode is RTGS which is only
recognize the fact that UPI based payments 26% of respondents followed by other modes
systems are more secure and easier to use. Net banking is more popular because it has
Also, e-wallets have a limit to how much you been in existence from a long period.
can transfer into it but UPI based applications
such as BHIM are directly linked to your bank The study shows that 50% of respondents are
account and uses a virtual payment address satisfied with the digital payments while
(VPA) to do the monetary transfers. Among all only15% of respondents are unsatisfied. From
the digital payments apps we can see that this we can infer that digital payments are
MobiKwik, Paytm and GoogleTez are leading. gaining in popularity and there is a positive
perception about them. The respondents who
Study also shows that 33% of respondents use are not comfortable with digital payments are
digital payments monthly and this number is on respondents who are older and find the digital
the rise since 2016. This can be interpreted as apps tedious and also those who have low
the rising popularity of digital payments in the digital literacy.
Indian economy. What started as a necessity
post demonetization has now become a regular From the study it is clear that the use of digital
trend.The study also shows that 7% of the modes by the respondents for their transactions
respondents use digital payment mode daily are very similar. There is no difference in terms
while others use in fortnightly or monthly. of the amount of transactions they do. It is all
counts to ¼th of the respondents using different
40% of the respondents believe that the most amount of transactions. This consistency will
important reason they use digital payments is be based on the income of the respondents and
convenience. The second factor is “cash also the spending patterns of the respondents.
rewards” from using digital apps instead of

Adarsh Journal of Management Research (ISSN 0974-7028) - Vol. : 12 Issue : 1 Sep 2018 - Sep 2020 42
It can be inferred from the above data that the regulations to govern these transactions so that
highest percentage of respondents that is 26% more users/customers feel secure enough to use
use digital payments for all the stated reasons them.
and least percentage that is 11% uses it for At the present time there is a considerable lack
grocery stores as a reason. This could be of digital literacy, even among the older urban
because the digital modes provides all this respondents who expressed hesitation in using
options available to the customers which these applications to make digital payments. If
motivates them to use it as an all-rounder. India has to progress towards an increased
It can be inferred that most of the respondents digital economy this lacuna has to be addressed
(54% ) feel the difference in using the UPI going forward. There is still a lot of the
based payment apps versus and other digital population that does not use these digital
modes of payments. This is the most important payment systems and programs should be
information which tells us that the customers’ organized to help people mostly in rural areas
are increasingly more comfortable with using and the old people to help them to understand
UPI based applications because of the security the payment system along with this creating
reasons and also the ease of transaction without awareness about the system.
entering credit card/debit card details, CVV Limitations of the Study and Scope for
numbers etc. This is further substantiated by Future Research
the fact that 45% of respondents have stated
that UPI transaction are more secure and This study has made an attempt to understand
reliable and only 17% disagrees with the the customer perception towards digital
statement. This is the primary factor that payments particularly UPI based applications
differentiates the UPI based apps from with such as BHIM. A possible weakness of this
other modes of payment such as e-wallets. study is that only 100 respondents were
surveyed. Also, the respondents considered
MANAGERIAL IMPLICATIONS were educated and from the urban area of
Based on the findings from the study it can be Bangalore city. Further studies can be
concluded that digital payments are here to stay conducted on a rural sample where the
since the number of smartphone users in India respondents are not so highly educated or
is steadily increasing. With increasing number computer savvy and there may be additional
of young users using only digital payments, the infrastructural problems of lack of smart
numberof digital transactions, especially UPI phones and poor internet connectivity. These
based transactions are increasing. The factors may give a new focus to this research.
advantage of UPI in comparison to e-wallets is REFERENCES
that UPI uses VPA (Virtual Payment Address)
technology which allows you to transfer money Anand, Nupur, https://www.business-
without giving out your account details. standard.com/article/finance/launch-of-unified-
payment-interface-deferred-
However all the digital payment systems 116073000855_1.html
should work towards creating a customer
centric product that helps increase customer Bamasak O (2011) Exploring consumers
awareness on how to use the application acceptance of mobile payments-an empirical
securely and save time and get rewards. The Study. International Journal of Information
legal system has to create strict rules and Te c h n o l o g y , C o m m u n i c a t i o n s a n d
Convergence 1: 173-185

Adarsh Journal of Management Research (ISSN 0974-7028) - Vol. : 12 Issue : 1 Sep 2018 - Sep 2020 43
Dahlberg T, Mallat N, Oorni A (2003) Kabir, Muhammed Auwal, SitiZabedah and
Consumer Acceptance of Mobile Payment AidiAhmi (2015), Adoption of e-Payment
Solutions-Ease of Use, Usefulness and Trust. systems
The Second International Conference on Lele, A. (2016). Unified Payment Interface app
Mobile Business, Vienna, Austria, pp: 17-25. downloads cross 10,000. Business Standard.
Dahlberg T, Mallat N, Ondrus J, Zmijewska A Retrieved from www.business-standard.com
(2008) Past, present and future of mobile Liu S, Zhuo Y, Soman D, Zhao M (2012) The
payments research: A literature review. consumer implications of the use of electronic
Electronic Commerce Research and and mobile payment systems. Rotman School
Applications 7: 165-181. of Management,University of Toronto.
Dahlberg T, Mallat N, Ondrus J, Zmijewska A Mallat N (2004) Theoretical Constructs of
(2008) Past, present and future of mobile Mobile Payment Adoption. 27th Information
payments research: A literature review. Systems Research Seminar, Scandinavia
Electronic Commerce Research and (IRIS), Falkenberg, Sweden, pp: 34-46.
Applications 7: 165-181.
Padashetty S, Kishore KS (2013) An Empirical
Dewan SG, Chen LD (2005) Mobile payment Study on Consumer Adoption of Mobile
adoption in the USA: a cross- industry, cross- Payments in Bangalore City-A Case Study.
platform solution. Journal of Information Researchers World 4: 83.
Privacy and Security 1: 4-28.
Pratik B (2017), Demonetization effect: Digital
Dezan Shira and Associates (2017) Growth of payments India's new currency; debit card
Digital Payments Systems in India. transactions surge to over 1
http://www.india-briefing.com/news/growth- billion.http://economictimes.indiatimes.com/in
of-digital-payments-systems-in-india- dustry/banking/finance/banking/digital-
14797.html/ payments-indias-new-currency-debit-card-
Doan N, (2014) Consumer adoption in mobile transactions-surge-to-over-1-
wallet: a study of consumers in billion/articleshow/58863652.cms
Finland.http://theseus.fi/bitstream/handle/1002 Rathore HS (2016), Adoption of Digital Wallet
4/86343/Ngoc_Doan.pdf?sequence=1 by Consumers. BVIMSR’s Journal of
IMAP report (2016) Payments Industry in India Management Research 8: 69. JIBC December
Q 4 2 0 1 6 . 2017, Vol. 22, No.3 - 14 -
http://www.imap.com/Reports/Q4%202016%2 Soman D (2001) Effects of payment
0Payments%20Industry%20in%20India.pdf mechanism on spending behavior: the role of
KPMG (2017), Digital Payment-Analyzing the rehearsal and immediacy of payments. Journal
cyberspace.https://assets.kpmg.com/content/da of Consumer Research 27: 460-474.
m/kpmg/in/pdf/2017/04/Digital_payments_Ana Soman D (2003) The effect of payment
lysing_the_cyber_landscape.pdf transparency on consumption: quasi-
Katre, H. (2016). What is UPI and How It Will experiments from the field. Marketing Letters
Benefit Your Business. Profit Books. Retrieved 14: 173-183.
from http://www.profitbooks.net/upi-unified- Srivastava J, Raghubir P (2008) Monopoly
payment-interface/ Money: the effect of payment coupling and

Adarsh Journal of Management Research (ISSN 0974-7028) - Vol. : 12 Issue : 1 Sep 2018 - Sep 2020 44
form on spending behavior. Journal of Watal R (2017) Digital payments surge 55% in
ExperientalPsycology Applied 14: 213-225. 2016-17.
Taheam K, Sharma R, Goswami S (2016) http://www.livemint.com/Industry/hF8D3D6b
Drivers of Digital Wallet Usage: Implications WBie6IoJzWtdZO/Digital-payments-surge-55-
for Leveraging Digital Marketing. International in-FY17-Niti-Aayog.html
Journal of Economic Research 13: 175-186. How UPI Works. (2016). Live Mint. Retrieved
Wamuyu PK (2014),The role of contextual from www.livemint.com
factors in the uptake and continuance of Mobile https://www.businesstoday.in/current/economy-
money usage in Kenya, The Electronic Journal politics/18-per-cent-more-upi-transactions-in-
of Information Systems in Developing december-total-of-over-3-billion-for-the-
Countries. year/story/306073.html

Adarsh Journal of Management Research (ISSN 0974-7028) - Vol. : 12 Issue : 1 Sep 2018 - Sep 2020 45