How UPI, DigiMelas, and other fintech schemes became the Modi Government’s trump card

We were standing in a queue at an amusement park in Noida when the cashier asked a group of young men standing directly in front: would they pay in cash or by card? They were all Hindi-speaking teenagers from nearby villages. Not the kind you would expect to possess bank cards. Suddenly one of them piped up with a smile, “Modiji has said no, go digital. So, we will pay by UPI.” They broke into loud guffaws and good-natured backslapping. But I noticed they all took out their phones and paid for their tickets digitally.

When I asked the young men about the Modi comment, they responded with slightly self-conscious but proud smiles. Not all of them were BJP supporters, I realised later in conversation. Some of them voted for the Samajwadi Party, BJP’s great rival in UP. But the conversation was a useful reminder of how intertwined UPI’s success is with politics.

The quantum growth of UPI may seem a fait accompli now. But no one could have predicted it when the system was launched in 2016.

As [Minister of State for Electronics and Information Technology Rajeev] Chandrasekhar explained when asked about the early challenges, “It is not easy from an execution point of view. It is not easy because of the vested interests that will fight it. It is not easy because of the political people who will oppose it. It is not easy because all of those so-called gyanis [learned ones] in Delhi – who are the status quoists – who don’t like change and will say, ‘No, no, no … What if, what if, what if.’ The big push came politically.

On December 25, 2016, the Central government, the ministry and Niti Aayog started two schemes which provided incentives for shop vendors to adopt digital payments: the Lucky Grahak Yojana and DigiDhan Vyapar Yojana. Within the first three months, by March 2017, 14 lakh people and 77,000 merchants had been disbursed a total of Rs 226.45 lakh (Rs 1,76,95,40,000 to consumers and Rs 49,50,00,000 to merchants) under the two incentive schemes. Early adopters were given cash awards. Fifteen thousand daily winners qualified for the total prize money of Rs 1.5 crore every day. In addition, 14,000 weekly winners qualified for prize money of over Rs 8.3 crore every week. 62 The idea was that “if you did digital payments, you will get so many incentives. It was a cashback scheme”.

Significantly, Modi fronted this push, lending his political weight to the drive. Large full-page advertisements were printed in newspapers. As a senior government official recalls, “The ministry took big advertisements out – in six steps, how digital payments are done, whether you have mobile with data, feature phone or smart phone, Aadhaar-enabled payment or not. They showed how with six steps you can close a transaction.”

Saurabh Kumar, additional commissioner of GST, who served as personal secretary to Ravi Shankar Prasad, IT minister at the time, points out that the key factor was “how fast people – and I mean government people – adopted digital payments as a natural thing”. After all, if few in the government believed in the idea, how would they convince others to make the shift? This may have been the reason why, in February 2016, according to Kumar, Modi sprang a surprise on the team. “The PM told us one day,” he recalls, “that we have to do one hundred digital fairs in one hundred days.” As he put it:

Everybody who was involved said this is impossible. They said this can’t be done. Three times (teen teen baar) meetings were held. Then Principal Secretary of the PM said this won’t be possible. And they used to go and request to the PM that Sir, this won’t be possible. The PM said – there is a noting in the file on the last meeting – that if it won’t be possible, you don’t do it, but it has to be done: one hundred meetings in one hundred days. Somebody else will do it. And finally, everyone got mobilised. Till the District Magistrate-level, everybody was mobilised. All the ministries were mobilised. A team was made that used to go and teach in rural areas how digital payments are to be made. 

Today we may not think of this as a big deal or we are not aware, but this educated the entire system one hundred per cent. What may have otherwise taken five years, ten years, educating village after village, in hundred days it was done. 

These fairs were christened DigiDhan Melas. “There was a full team of 50 to 100 people here who were themselves first trained. They understood all the questions. Then they used to go to each mela and used to explain how this will happen. We held a hundred melas in a hundred days and all over the country. DMs [district magistrates], SDMs [sub-district magistrates] were all involved.” The first aim was to educate the government itself. Once that was done, the programme managers would move on to meeting ordinary citizens.

“They used to call shopkeepers. Because if the shopkeeper doesn’t enable the receiving of digital payments, however much someone wants to use it, how will they? So, shopkeepers were called. They [officers] used to explain to them how to use [UPI].”

The officers coordinating these melas started seeing initial results. But their efforts were unfolding in the period immediately after demonetisation and doubts remained.

“If you look at the graph, I remember that time there used to be an entry – this is above the trending line but it is an effect of demonetisation,” says Kumar. ‘We used to wonder how long will this progress last.” Initially, as part of the government initiative to popularise digital payments, DigiDhan Melas were organised in 100 cities over a period of 100 days in 26 states and seven Union Territories. In this initial push, over “5,000 financial institutions…reached 15 lakh citizens through the melas and at least 16,000 government and private institutions were declared cashless”. The melas were held in places as diverse as Gangtok and Imphal in the northeast, Haridwar in the north, and Nellore in the south. One result was that the BHIM app was downloaded 18 million times in the first three months after its launch. By August 2022, this number had increased to 50 million.

As an official told me, “For the first six months, people used to keep doing commentary – when will it fall? When will it fall? It never fell. The commentary stopped. That was how it was in mainstream media. The fact is that we have virtually been hitting an all-time high every month. Every month has seen UPI hitting all-time highs since.” By March 2022, Bloomberg’s Andy Mukherjee could declare that “fintech is everywhere in India”. So much so that its “banks need a counter-attack”. As he put it, “Visit a mid-sized store in an Indian city, and you’d wonder if it exists to make any money. It might just as well be there to process transactions for half-a-dozen payment apps: PhonePe, Paytm, Google Pay, BharatPe, Amazon Pay and MobiKwik. Add up the merchants who have downloaded the digital services and the figure quickly reaches 80 million. A third of India’s 60 million-plus small businesses are using an average of four different platforms.”

Excerpted with permission from India’s Techade: Digital Revolution and Change in the World’s Largest Democracy, Nalin Mehta, Westland.