UPI, wallets and where Aadhaar fits
India's phone payments run mostly on UPI, a bank-to-bank system. Wallets came first. Here is the difference, and the few places Aadhaar touches either.
Most phone payments in India today are UPI payments. The Unified Payments Interface, built by the National Payments Corporation of India, moves money directly from one bank account to another, in seconds, at any hour. NPCI publishes monthly volumes on its UPI statistics page; in August 2025 the count passed about 20 billion transactions in one month.
Wallets versus UPI
| Mobile wallet | UPI | |
|---|---|---|
| Where the money sits | In a balance held by the wallet company | In your bank account until it moves |
| Regulated as | Prepaid payment instrument | Bank-to-bank payment through NPCI |
| Works across apps | Mostly within one company's network | Any UPI app can pay any UPI address |
| Arrived | Early 2010s | Pilot 11 April 2016, public August 2016 |
In 2015 retail leaders doubted that wallets would work in India at all. Read what they forecast and what happened, including demonetisation on 8 November 2016 and the launch of BHIM on 30 December 2016.
Where Aadhaar comes in
- Setting a UPI PIN. NPCI allows Aadhaar OTP as an option for setting a UPI PIN, so a person whose bank account is linked to Aadhaar can start using UPI without a debit card.
- Cash with a fingerprint. The Aadhaar Enabled Payment System lets people withdraw and transfer money at a micro-ATM using their fingerprint.
- Know-your-customer checks. Wallets and payments banks used Aadhaar e-KYC to verify customers. Since the 2018 Supreme Court judgment, that must be the customer's choice.
The Paytm Payments Bank order
On 31 January 2024 the Reserve Bank of India ordered Paytm Payments Bank to stop accepting new deposits and top-ups into customer accounts and wallets. The order showed the regulatory gap between a wallet brand and the bank behind it. UPI payments through the Paytm app continued through partner banks.
Sources
- National Payments Corporation of India, UPI product statistics and product overview.
- Reserve Bank of India, press release on action against Paytm Payments Bank Ltd, 31 January 2024.
- Reserve Bank of India, Master Directions on Prepaid Payment Instruments.