UPI: Anatomy of a Payment Transaction

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pprtk25 about 22 hours ago 102 commentsRead Article on timeseriesofindia.com

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Discussion (102 Comments)Read Original on HackerNews

brainless•about 8 hours ago

For those outside India and/or non-active users of UPI - it drives so many transactions that even for an engineer, I forget how often I use it:

  - Payments between family members
  - Payments for every tiny/small item - a bag a chips or a cup of tea for example
  - Payments for car mechanic, plumber, or other services
  - Payments for online shopping or services - yes web apps show the UPI QR code and I can pay from my phone by scanning. Mobile apps will simply open the UPI app's payment screen
  - Buses, flights, trams, taxis, trains - online or on road

On an average day in a city like Kolkata, me and my partner make up to 20-30 transactions. I live in a small Himalayan village most of the year and I still make roughly 6-8 transactions a day.

dolphenstein•about 8 hours ago

After adding UPI as a payment option to my little microSaaS, I'm finally starting to see sales in India. Was like trying to extract hen's teeth to get an Indian to sign up before that.

porridgeraisin•about 5 hours ago

Yes this. Anytime a SaaS supports UPI Autopay, I'm 10-100x more likely to subscribe.

For context: it's basically a recurring payment but you open the Autopay section in Google pay or whichever app and it shows you all your subscriptions right there (which is a major +), the transaction history, and cancellation happens in the UPI app itself I don't have to faff around in the SaaS and deal with potentially some dark patterns.

dyauspitr•about 1 hour ago

That’s absolutely huge. All your subscriptions in one place that you can just turn off from there directly. It’s one of my favorite things about payments going through the apple App Store.

miki123211•about 6 hours ago

Systems that are based on one-time codes instead of permanent credentials are really under-appreciated in the anglosphere.

Giving your credit card to your child / friend / spouse / subordinate, so that they can buy something with your money, is a lot more risky than giving them an OTP, valid for a single transaction, which you have to approve in your app anyway.

Poland's Blik is based on 6-digit codes, which makes this feature even more useful, as you can E.G. dictate that code over the phone to a trusted acquaintance at the ATM.

navigate8310•about 2 hours ago

Because those OTPs can be intercepted by any MITM unless you are using on-device 2FA generated by an app.

inigyou•about 4 hours ago

Do you have plans for when the government interprets your small payments as terrorism and seizes your bank account?

I think every country goes through this and then goes back to cash, but at different rates.

hgoel•1 minute ago

Why would they interpret a system being used for the purpose it was designed for as terrorism? Using it for small purchases is the intended use case.

navigate8310•about 2 hours ago

This is implied in an authoritarian country like India.

However, the Government is in a fix. Almost the complete stack is subsidized by the Government. This led to an explosive adoption growth for merchants as there is no MDR and payers for ease of transaction as they don't need to carry hard currency anymore. This has enabled the Government gaining complete insights into spending and earning patterns. Withdrawing this massive subsidy will again lead to people using cash. So in order to prevent "terrorism" they will subsidize for the foreseeable future.

rdksu•about 1 hour ago

India is not an authoritarian country ffs

lxgr•about 3 hours ago

Do you have any examples?

elendilm•about 18 hours ago

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.

brabel•about 5 hours ago

I think it was the same with PIX in Brazil, and Swish in Sweden, and probably many more precedents.

vickychijwani•about 2 hours ago

Don’t know about Swish but UPI heavily influenced Pix, from its open architecture, alias-based addressing, and QR code infrastructure

dyauspitr•about 1 hour ago

They are not precedents. Infact PIX heavily borrowed from UPI.

dominotw•about 13 hours ago

it worked because india never had credit card payments( at scale ) . they went straight from cash to digital payments.

sometimes_all•about 11 hours ago

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.

nafey•about 11 hours ago

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.

oasisbob•about 9 hours ago

When people here are saying "credit cards" are we talking about purely domestic networks, or what?

Visa and Mastercard payment rails are somewhat disjoint, even for large Indian companies. As a foreigner, there's always been a huge acceptance gap vs many other countries when you want to use a card.

altmanaltman•about 9 hours ago

It has everything to do with credit cards if you understand what the parent comment is saying. Credit card allowed people to use something else other than cash when internet banking/digital payments wasn't available and smartphones were not a thing. Their entire society adopted credit cards as a very normal way of payment even for everyday stuff since it offers convinence over cash and rewards.

Yes India got credit cards but it was not widespread and people did not use it as a daily thing since most stores/outlets did not have the card swiping system. UPI solved this problem very well since you just need a QR code and a valid bank account and no transaction charges making it perfect for day to day spending.

We got digital payments and smartphones together. But in the US for example, credit cards came much earlier and were able to capitalize very well since there wasn't a lot of the technology at that time which we take for granted today.

treenode•about 5 hours ago

India has a robust Debit card system instead of Credit cards.

drewfax•about 9 hours ago

Yes, UPI works. But it's a terrible system for privacy and autonomy. It has so many intermediaries, requires phone number and linked to person's identity. It should not be called a peer-to-peer payment system in anyway. It is controlled by the government rather than Visa or Mastercard. That's the only the difference.

stAInley•about 5 hours ago

Sure, but visa and mastercard share their transactions with the US government (among others). "Hot Watch": where the US gov gets real time surveillance on a target. Bank Secrecy Act: where private networks and their issuing banks are legally mandated to act as unpaid deputies for the state. At least with UPI you're sharing with less governments?

thedelanyo•about 5 hours ago

Money after all is controlled by the government anyway.

Superbowl5889•about 3 hours ago

Great Read ! Thank you for such detailed introduction to UPI, I'm lookingfor such articles for mastercard or VISA

pzmarzly•about 20 hours ago

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.

repeek•about 20 hours ago

22B in the month of June 2026, so 264B extrapolated annually.

thehamkercat•about 19 hours ago

~8.8K TPS on average

jesuswasjew•about 20 hours ago

Centralized, kyced, private money transaction network. Is this something good?

haskman•about 19 hours ago

Yes it is. It's not trying to be new money, it's your money that already works.

fragmede•about 19 hours ago

How is it KYCd yet also private?

nocoder•about 9 hours ago

Question to op - Do QR based systems in other SEA countries like promptpay in Thailand also work on similar logic?

Also, great website and layout, very respectful of the reader. Clean and with zero distractions.

prtk25•about 7 hours ago

Thanks for the kind feedback.

I am not very familiar with the PromptPay architecture, but a quick search reveals that the user-facing app for QR scanning is bank-owned, rather than a Third-Party Application Provider (TPAP) like Google Pay is for UPI. In the case of UPI, you can link multiple accounts from the same or different banks to a single TPAP.

Another potential difference is the interbank protocol implementation. For UPI, the messages involved in a transaction are asynchronous. When NPCI calls the remitter bank for a debit request (ReqPay message), the bank is only supposed to send back an acknowledgement message (Ack) in the same HTTP request. Once the processing is done, the bank's switch sends a response (RespPay message) to a callback endpoint at NPCI (which, in turn, returns an Ack to the remitter bank). A similar flow happens when NPCI sends a request to the beneficiary bank for credit.

teyc•about 5 hours ago

What funds the UPI system? I assume that it’s cheaper than MC/Visa rails?

filleduchaos•about 4 hours ago

It's an industry-owned initiative, i.e. all licensed banks, including the central/apex bank (pretty sure this is the Federal Reserve in American parlance?) are stakeholders. The funding comes almost entirely from these banks, and the transfers themselves are free (between personal/individual accounts, at least). I'm pretty sure the government partially reimburses the banks to soften the cost, so I suppose you could say it's also funded by government subsidy?

Some similar systems have transaction fees and run as for-profit organisations, but the fees are tiny compared to card transactions. For instance Nigeria's NIP has a maximum fee of ₦53.75 (roughly four cents), with most banks allowing you to transfer up to ₦5 million in a single transaction.

sometimes_all•about 11 hours ago

The content is good, but the crore/billion toggle is fantastic. A great addition, I hope it catches on in India-specific websites.

I just wish it had a tooltip because its purpose was not immediately clear (CR/BN is a bit cryptic).

OJFord•about 5 hours ago

Ooh that's what that is - I thought it looked like a language toggle, but I couldn't work out the languages or in what language the abbreviations were (like HI/EN), and obviously it didn't have that effect. That is a nice idea.

prtk25•about 10 hours ago

Thanks for the feedback! I will try to make it clearer.

codethief•about 12 hours ago

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.

GZGavinZhao•about 18 hours ago

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).

bri3d•about 17 hours ago

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.

zaptheimpaler•about 17 hours ago

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.

repeekad•about 17 hours ago

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.

agnishom•about 14 hours ago

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

dyauspitr•about 11 hours ago

Alipay is the usual deal with a single company’s server and then they settle those later. Relatively basic compared to this.

larodi•about 6 hours ago

I can sense Claude behind all interactive graphics here, yet it apparently does great job to further make the point and interestingly TimesOfIndia is a major media outlet.

shscs911•about 5 hours ago

It's Time Series of India, not Times of India. https://timeseriesofindia.com/about https://github.com/time-series-of-india/tsoi

I also thought it was from Times of India initially

gowthamgts12•about 5 hours ago

it's nowhere related to TimesOfIndia. It's `Time Series of India`.

from their footer:

> Time Series of India is an open-source project charting India's public data. All data belongs to the publishing agencies; charts and text may be cited with attribution.

mndgs•about 6 hours ago

So? Read the article, and? Some pretty basic payment flows.. Nothing about settlements, payment card messaging flow (you see a simplified logic in the article), nothing about other payment rails.. Come on.

filleduchaos•about 6 hours ago

Maybe you just don't know what you're looking at? UPI is an inter-bank system, why on earth would you expect an article on it to contain a payment card messaging flow discussion?

adithyassekhar•about 12 hours ago

I like the article but “ Bricolage Grotesque” and the claude background colour just puts me off.

dyauspitr•about 12 hours ago

Why? It looks pleasant.

adithyassekhar•about 10 hours ago

It does. But I’ve seen it so many times now.

colesantiago•about 13 hours ago

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.

khurs•about 5 hours ago

Instant payment systems by country:

https://en.wikipedia.org/wiki/Instant_payment#Notable_instan...

inigyou•about 4 hours ago

I too want the government to monitor my transactions in real-time so they can disable access to my money if they think I'm a terrorist.