How Payments Progressed in India – A Year-Wise History
India’s payment ecosystem moved from cash and paper instruments toward an interoperable digital system in under two decades. Major milestones include RTGS (2004), NEFT (2005), IMPS (2010), UPI (2016) and successive innovations like AePS, BBPS, UPI Lite, and credit-on-UPI. Policy pushes such as demonetisation (2016) accelerated adoption, while RBI and NPCI ensured scalability, safety, and trust. By 2025, UPI dominates retail digital payments, with ongoing regulatory refinements to maintain performance and stability.
1. Pre-2004: Cash, Cheques and Early Electronic Efforts
Before electronic rails, cash and cheques dominated. Urban centres used cards and net-banking began to appear as internet access improved. The RBI and banks progressively automated clearing houses and electronic clearing services to move recurring credits and debits away from paper.
2. 2004 – RTGS: Real-Time Settlement for Large Value Payments
On March 26, 2004, India’s Real Time Gross Settlement (RTGS) system went live. Initially designed for inter-bank settlement, it was later extended to customer transactions. RTGS assured finality and speed for high-value transactions, reducing settlement risk and modernizing wholesale payments.
3. 2005 – NEFT: Retail Electronic Fund Transfers
In November 2005, National Electronic Funds Transfer (NEFT) was rolled out, allowing customers to transfer funds electronically across banks. NEFT used a batch-settlement approach, later upgraded to near-real-time settlement with extended timings, making it the default digital mode for retail transactions.
4. 2010 – IMPS: Instant 24×7 Retail Payments
On November 22, 2010, the Immediate Payment Service (IMPS) was launched, offering instant 24×7 inter-bank fund transfers via mobile, internet, ATM, SMS, and USSD. IMPS brought true real-time retail payments to India, paving the way for mobile-first payment solutions and setting the foundation for UPI.
5. 2012–2015 – Aadhaar, AePS and BBPS
Several building blocks for inclusion were introduced. AePS (Aadhaar-enabled Payment System) allowed basic banking transactions using Aadhaar authentication at micro-ATMs. BBPS (Bharat Bill Payment System) centralized recurring bill payments. USSD (*99#) expanded reach to feature-phone users and remote areas, strengthening financial inclusion.
6. 2016 – UPI and Demonetisation
In 2016, the Unified Payments Interface (UPI) was introduced. It unified IMPS rails into an app-centric, interoperable platform, enabling simple transfers using virtual payment addresses, merchant integrations, and peer-to-peer payments.
On November 8, 2016, demonetisation of ₹500 and ₹1,000 notes created urgency for digital alternatives, accelerating adoption of UPI, wallets, and online payments. In December 2016, the BHIM app was launched to popularize UPI and standardize the user experience.
7. 2017–2019 – UPI Growth and Merchant Adoption
UPI transaction volumes skyrocketed from a few million in 2016 to hundreds of millions by 2019, driven by apps like Google Pay, PhonePe, and Paytm. Merchant adoption also surged, with QR codes becoming commonplace. Features like UPI Autopay for recurring transactions expanded use cases beyond P2P transfers.
8. 2020–2022 – Pandemic Tailwinds and New Features
The COVID-19 pandemic accelerated digital payments as people avoided cash. UPI became the preferred choice for everyday transactions. Features like IPO payments through UPI and in-app autopay for subscriptions were introduced, while NPCI worked on scaling infrastructure to handle record volumes.
9. 2022–2024 – UPI Lite and Credit on UPI
UPI Lite was introduced to simplify small-value transactions, enabling quick, PIN-less payments from an on-device balance. Credit integration also began, with RuPay credit cards being linked to UPI, opening up new credit-based transaction opportunities and reshaping consumer payments.
10. 2023–2025 – UPI Dominance and Regulatory Refinements
By 2023, UPI had become the dominant mode of retail digital payments in India, processing billions of transactions monthly. In 2025, new rules were introduced to improve system resilience, manage load, and ensure fair competition among payment providers. UPI continues to scale, reaching record transaction volumes month after month.
11. Year-Wise Snapshot of Key Milestones
- 2004: RTGS launched.
- 2005: NEFT launched.
- 2010: IMPS launched.
- 2012: AePS, BBPS, and USSD introduced.
- 2016: UPI launched, demonetisation accelerated adoption, BHIM app released.
- 2017–2019: UPI volumes grew exponentially, merchant QR adoption expanded.
- 2020–2022: Pandemic accelerated digital usage, IPOs and autopay enabled via UPI.
- 2022–2024: UPI Lite launched, credit-on-UPI began.
- 2023–2025: UPI dominates retail payments, record transaction volumes, new regulations for resilience.
12. Big Picture: Drivers, Challenges and the Road Ahead
Drivers: Ubiquitous smartphones, Aadhaar, Jan Dhan accounts, demonetisation, interoperable NPCI infrastructure, and QR-based merchant ecosystems.
Challenges: Fraud, dispute resolution, systemic resilience, and ensuring fair competition in a concentrated market.
Future: Cross-border UPI adoption, offline and low-connectivity payments, higher limits for key sectors, and integration of more credit-based products.
