NPCI Set to Launch UPI for Secondary Market from Jan 1

An analysis of NPCI’s upcoming UPI payment facility for secondary market stock investments and associated impacts.

Source and Citation: Article from ET Bureau published on Dec 30, 2023, originally titled “NPCI Set to Launch UPI for Secondary Market from Jan 1”

Analysis of this news for a layman

The National Payments Corporation of India (NPCI), which oversees digital payment platforms like UPI (Unified Payments Interface) and RuPay cards, has announced that it will launch a UPI facility for secondary market stock trading starting from January 1, 2024.

This new feature will allow retail investors to link their bank accounts to their trading accounts and use UPI apps to directly place orders for purchasing shares and make payments. This eliminates the need for traditional methods like net banking.

When investors place orders, the linked bank account’s funds will be blocked, similar to the mechanism used for IPO applications. After the trade is confirmed by the stock exchanges, the funds will be debited. Initially, a pilot rollout will involve limited users, apps, and banks to test for stability before a full-fledged launch.

This move aims to make stock investments more accessible by leveraging the widespread adoption of UPI for other transactions. It aligns with the goal of financial inclusion by attracting more retail investors to the stock market. However, the successful execution of this initiative will be crucial.

NPCI Set to Launch UPI for Secondary Market from Jan 1

Impact on Retail Investors

For retail investors in India’s stock market, the introduction of UPI payments carries several implications:


  • It provides a seamless way to link bank accounts with trading accounts, eliminating the need to track registration status, which is typical in other modes of payment.
  • UPI payments offer 24×7 flexibility, allowing investors to place orders and make payments outside of traditional banking hours.
  • As UPI usage increases, there is the potential for cost savings on transaction charges paid to banks and brokers, making investing more affordable.


  • The launch carries some execution risks, and technical glitches at the initial stage may temporarily discourage users until stability is proven. Prudent adoption is advised after evaluating initial user feedback.

While the convenience and potential cost savings are promising for the future, it’s essential for investors to proceed cautiously during the initial phase.

Impact on Industries

Several Indian industries will witness impacts from the adoption of UPI payments for stock trading:

Stock Broking:

Mainstream brokerage firms will need to upgrade their backend systems to seamlessly integrate with UPI. Failure to do so could result in the loss of tech-savvy customers to fintech-focused rivals.

Payments Industry:

NPCI could expand its role as UPI transactions increase, gaining a larger share of the transaction market at the expense of legacy channels, thereby improving monetization.

Wealth Management:

This move represents the next wave of digital advancement, and independent investment advisors may adopt it quickly, given that their fiduciary offerings align well with a transparent direct UPI investing model.

Technology Startups:

Fintech apps like Groww and Upstox are positioned to capture investor attention by leveraging UPI infrastructure effectively. This may put pressure on established players through low-cost structures.

Interoperable platforms are expected to drive the next wave of financial inclusion, though there are risks for slower intermediaries that may face short-term challenges in adapting.

Long Term Benefits & Negatives

The long-term impact of UPI adoption for stock trading includes several positives:


  • It will lead to the structural improvement of formalization, governance, and risk management practices in investing, aligning them with the success of other UPI use cases.
  • The simplified process of investing through UPI will ensure accessibility and a level playing field between first-time and experienced investors.
  • The widening investor base will compel improvements in research, advisory services, and product innovation, ultimately better serving less financially literate users.

However, precautions must be taken to address potential negatives:

  • Preventing misselling tendencies is crucial as ease of onboarding increases. Balanced oversight is needed to ensure compliance with regulations.
  • Market stabilization risks during volatile periods could occur if mass panic reactions are amplified due to the ease of large-volume redemptions. Circuit breakers offer a cushion but require careful implementation.

While this represents a positive disruption, orderly adoption that allows complementary aspects to evolve is necessary to ensure long-term durability.

Short Term Benefits & Negatives

In the short term (starting in 2023), the introduction of UPI payments for stock investments is expected to have several impacts:


  • Faster account opening and instant settlement will eliminate capital immobilization delays faced by first-time investors, encouraging more participants to enter the market.
  • The announcement solidifies India’s position internationally in terms of technology-led financial market reforms, enhancing the country’s branding and credibility.


  • Transition challenges will be visible for brokers and banks that have not fully digitized client onboarding, risk management, and payment systems. These challenges may result in missteps.
  • The limited scope of the initial launch may limit the narrative potential. Any negative user experiences could carry over post the full nationwide launch. Messaging coherence will be critical.

In conclusion, while this move serves long-term goals, a measured and deliberate rollout is recommended to identify and address pain points during the initial stage. This approach will help drive mass adoption at scale after enhancements are made based on constructive feedback from early adopters.

Impact of UPI for Secondary Market Trading:

Indian Companies Likely to Gain:

  • Retail Brokerages:
    • Companies like Zerodha, Upstox, and Angel Broking could see increased user adoption due to the simplified and familiar UPI-based trading experience.
    • Market Sentiment: Positive, potential for higher account openings and trading volume.
  • Digital Payment Apps:
    • UPI apps like BHIM, Paytm, and PhonePe offering stock trading through Groww might see increased user engagement and potential revenue from transaction fees.
    • Market Sentiment: Positive, with potential for diversifying revenue streams and attracting new users.
  • Discount Brokers:
    • Companies like Zerodha and Upstox with their focus on low brokerage fees might benefit from a more cost-conscious investor pool attracted by UPI’s instant settlement.
    • Market Sentiment: Positive, potential for market share gains and higher profitability.
  • Financial Technology Companies:
    • Fintech players like Groww and YES Bank providing the initial infrastructure and platform for UPI trading could see increased brand recognition and potential expansion opportunities.
    • Market Sentiment: Positive, potential for partnerships, valuation increases, and attracting investor interest.

Indian Companies Potentially Impacted:

  • Traditional Brokers:
    • Full-service brokerages like ICICI Direct and Edelweiss might face increased competition from retail brokerages due to UPI’s accessibility and ease of use.
    • Market Sentiment: Neutral to slightly negative, depending on their ability to adapt and offer value-added services.
  • Large Banks with Limited Digital Presence:
    • Banks like Bank of Baroda and Syndicate Bank without strong UPI integration might experience slower adoption of UPI trading among their customer base.
    • Market Sentiment: Neutral to slightly negative, potential for slower market share growth in online brokerage services.

Global Companies Likely to Gain:

  • Global Financial Technology Providers:
    • Companies like Plaid and Fiserv offering technology solutions for payment APIs and financial data infrastructure might see increased demand from Indian fintech companies adapting to UPI trading.
    • Market Sentiment: Positive, potential for increased business from partnerships and market expansion.
  • Custodial Service Providers:
    • Global players like BNY Mellon and State Street might see additional demand for their securities settlement and custodial services as retail participation in the Indian stock market grows.
    • Market Sentiment: Positive, potential for revenue growth and market share expansion.

Global Companies Potentially Impacted:

  • Existing Stock Market Technology Providers:
    • Global companies providing trading platforms and back-office solutions to Indian brokerages might face disruption and increased competition from UPI-based solutions.
    • Market Sentiment: Neutral to slightly negative, depending on their ability to adapt and integrate with the new UPI infrastructure.

Disclaimer: This analysis is based on available information and future outcomes might differ. Always consult with a financial advisor for personalized investment advice.

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