India’s Unified Payments Interface, or UPI, has shaped payments from peer-to-peer use to being a vital tool for businesses. What began as a convenience has become a sophisticated payment infrastructure with widespread use across businesses, markets, and industries.

UPI in business payments

What is UPI?

UPI is a real-time payment platform introduced in 2016 by NPCI. It facilitates bank-to-bank transfers via UPI IDs, linked to phone numbers and bank accounts. Built on top of IMPS, it offers seamless interoperability between apps and accounts.

What are UPI apps?

UPI apps are interfaces that enable users to initiate instant financial transactions through the UPI system. They support peer-to-peer (P2P) and person-to-merchant (P2M) transactions. These apps can connect to multiple bank accounts and can route transactions via NPCI's UPI rails. To learn more about P2P payments, check out our article, here.

For merchants or customers to use UPI, the essential requirements include:

• A bank account with a participating Indian bank.

• A UPI-enabled app installed on a mobile device.

• A UPI ID (virtual address) or mobile number for linking.
  For some models like UPI Lite or UPI123Pay, users can transact with limited connectivity or via offline methods.

From P2P to nationwide P2M adoption

UPI’s first wave of adoption came through P2P transfers. Splitting bills with friends or sending money to family became effortless, building a strong base of consumer trust. Over time, its usage shifted toward merchant payments. Small retailers adopted UPI QR codes, eliminating the need for expensive POS terminals. Soon, large enterprises began integrating UPI into ecommerce checkouts, subscription services, and even recurring payment flows. By August 2022, UPI P2M transactions began outpacing P2P and by July 2024 exceeded P2P by 3.6 billion transactions.

By FY24, UPI facilitated 131 billion transactions worth ₹199.9 trillion; that represented more than double the volume of credit cards via POS terminals, and over 20 times that of digital wallets. Today, UPI supports over 675 banks and processes more than 18 billion transactions every month.

Applications of UPI across different businesses

eCommerce & direct-to-consumer (D2C) brands: Online stores have gained frictionless checkout capabilities. With UPI’s 99.2% success rate on real-time payments, UPI has improved both conversions and customer satisfaction.

Micro, small & medium enterprises (MSMEs): A recent survey found 73% of MSMEs in semi-urban/rural India reported growth due to digital adoption, especially because of UPI. For kirana stores and service providers, UPI offers a simple, affordable digital payment option in lieu of cash.

Rural commerce: Micro-entrepreneurs can leverage UPI data and draw insights from the same to make informed business decisions. Tea vendors or grocers in small towns can also run payments and access credit lines based on UPI transaction history.

Advantages of UPI for businesses

For businesses, UPI changes how money moves in ways that directly impact operational efficiency and customer experience.

Cash flow predictability: When customers pay via UPI, settlements can happen almost instantly (Depending on the payment provider), unlike card payments that can take a day or more. For subscription-driven businesses, recurring UPI mandates reduce churn by ensuring timely payments.

Customer convenience: At checkout, UPI is often the fastest option. With one tap on a familiar app, customers complete the transaction without reaching for their physical wallet or entering card details. For ecommerce players, this can mean lower cart abandonment rates.

Cost factor: Unlike cards, where interchange fees weigh on merchants, UPI transactions are largely free. That difference adds up quickly for businesses handling high volumes of micro-transactions, from food delivery platforms to SaaS firms charging monthly subscriptions.

Flexible access through UPI Circle: This allows multiple authorized users to make transactions safely and with boundaries. It's ideal for individuals and for delegated business operations.

How businesses can leverage UPI payments

UPI transaction data opens doors for insight-driven growth. For example, analyzing transaction timing can reveal patterns in customer demand. If most payments cluster around month-end, a retail chain can sync promotions with payday cycles. If data shows spikes during certain time windows, logistics planning can be optimized to match fulfillment with demand surges. Large-scale disbursements are another use case. FMCG companies that need to incentivize distributors can push rewards instantly via UPI, eliminating the delays of traditional bank transfers.

UPI adoption also boosts financial inclusion. Many small vendors and gig workers who may not have accepted digital payments before now prefer UPI, allowing larger businesses to extend their ecosystems without friction.

Accepting payments through UPI with Zoho Payments

When it comes to Zoho Payments, businesses can accept UPI with zero transaction fees, making UPI adoption both simple and economical, without compromising on reliability. Merchants can get started in three simple steps. They can sign up, create an account, complete account verification, and then start accepting payments via UPI at zero cost. For more details on Zoho Payments, click here.

Conclusion

UPI has moved beyond its roots in peer-to-peer transfers and is now transforming the way businesses manage collections and payouts. It gives businesses a fast, low-cost, and widely adopted option that integrates well with digital commerce. It is a driver of efficiency, customer experience, and financial agility. UPI has become a foundational layer in business payments, shaping how companies of all sizes accept, track, and reconcile money in India.